China has closed down several small commercial banks in the southern city of Beihai.

Chinese officials said the twelve institutions, known as credit cooperatives, were insolvent.

The BBC Beijing correspondent says most of the affected banks were set up in the property boom earlier this decade.

He says this is the latest effort to clean up China's debt-plagued financial system following the closure three weeks ago of one of the country's biggest investment firms, the Guangdong International Trust and Investment Corporation, GITIC.

Earlier this week GITIC became the first Chinese financial institution to default on a foreign bond since the communist takeover in l949.