The nation will accelerate the opening up of its banking sector to foreign investors and consider steps to increase the upper limit of shareholding in Chinese financial institutions by foreign banks, the country's top banking regulator said on Thursday.

The market share of foreign banks in China by assets has declined during the last five years. This is not beneficial for promoting competition and structural optimization in the banking sector, said Guo Shuqing, chairman of the China Banking Regulatory Commission, during the 19th National Congress of the Communist Party of China.

By the end of 2016, the total assets of foreign banks in China had reached 2.93 trillion yuan ($442.14 billion), accounting for 1.29 percent of the total assets of financial institutions in the Chinese banking sector, falling from 1.82 percent as of end-2012, according to the CBRC.

"We will give more space to foreign banks in the form of their establishment, the percentage of their shareholding (in Chinese financial institutions) and their scope of business," Guo said.

Since December 2003, the CBRC has allowed a single offshore financial institution to own up to 20 percent of a Chinese financial institution.

For multiple offshore financial institutions, if their total investments in an unlisted Chinese institution reach 25 percent and above, the FI is supervised in accordance with the regulations for foreign institutions. But if their total investments in a listed Chinese institution hit 25 percent and above, then it is supervised by regulators as a Chinese financial institution, according to the CBRC.

Prior to Guo's remarks at the 19th CPC National Congress, the State Council issued a notice on Aug 16, stressing its decision to keep carrying forward the opening of China's banking, securities and insurance industries to foreign investors, following a similar notice, issued in January, on relaxing market access restrictions for several types of foreign financial institutions.

Foreign banks welcomed the Chinese government's decision to further open up its financial sector.

Christine Lam, chief executive officer of Citi China, said: "The policy reforms are encouraging. They will support foreign banks' further engagement and participation in the opening and development of China's financial industry."

As the Chinese economy adjusts to a "new normal", international financial institutions are facing a series of external challenges－from economic restructuring to low interest margins and digitization. On the other hand, these trends also present opportunities to the entire banking industry, Lam said.

"With confidence in China's policy environment and a deep understanding of structural reforms of the economy, Citi remains optimistic about the potential and long-term trends in China's future," she said.

Like many other foreign banks, Citi is digging into renminbi internationalization, China's interbank bond market, and the Belt and Road Initiative for high growth opportunities.

Chen Jia contributed to this story.