Mr Xiao claimed there is an excellent opportunity for Chinese banks to expand in the current economic climate, stating the post-global financial crisis environment makes this an "inevitable trend", reports the Financial Times.
"The financial institutions devastated by the global crisis still need time to recover," he explained.
"[Chinese] banks that have the ability should hasten their pace in 'going abroad' and increase their international competitiveness."
The Bank of China chief went on to recommend that Chinese financial institutions focus their investments on emerging markets such as Africa, the Middle East, South America and south-east Asia.
Last month, Charlene Chu, an analyst with Fitch Ratings warned that Chinese banks will soon by hit by a wave of bad loans as a result of high lending levels in 2009.
By Asim Shah