Financial reform plans unveiletd to serve real economy in sustainable manner

China unveiled reform plans Saturday to improve the financial sector's capabilities to serve the real economy while guarding against systemic risks.

China must strengthen the leadership of the Communist Party of China over financial work, stick to the basic tone of seeking progress while maintaining stability, and respect the rules of financial development, said President Xi Jinping, at a two-day National Financial Work Conference that ended Saturday.

The conference has been convened every five years since 1997 and is widely considered to set the tone for financial reforms.

Three tasks are highlighted in the meeting, including making the financial sector better serve the real economy, containing financial risks and deepening financial reforms.

Serving the real economy is the bounden duty and purpose of the financial sector and the fundamental way to guard against financial risks, Xi pointed out.

The financial sector should improve service efficiency and quality and channel more resources into major and weak areas of economic and social development, he said.

Developing direct financing will be prioritized while indirect financing structure should be optimized by accelerating strategic transformation of state-owned major banks and developing small and medium-sized banks and private financial institutions, according to Xi. 

The reiteration of the role of the financial sector points out the development direction of the financial sector and emphasis on direct financing is also quite reassuring for the stocks and bond markets, according to Li Huiyong, a senior analyst with Shenwan Hongyuan Securities.

Xi also said that guarding against systemic financial risks is the eternal theme of financial work and the government should take stronger initiative to monitor, warn against and deal with risks in a timely manner.

China will accelerate developing laws and regulations governing the financial sector, improve macro prudential management and emphasize functional as well as behavioral regulation, according to Xi.

The government will continue to deleverage the economy by firmly taking a prudent monetary policy and prioritizing reducing leverage in state-owned enterprises, Xi said.

The country will also resolutely deepen financial reforms including improving financial regulation coordination and shoring up weak links in supervision.

China will set up a committee under the State Council to oversee financial stability and development and the central bank will play a stronger role in macro prudential management and guarding against systemic risks, according to Xi.

The introduction of the State Council financial stability and development committee will help improve regulation effectiveness and address regulation challenges brought by increasingly mixed financial services, according to Lian Ping, chief economist with Bank of Communications.

Reforms of the financial regulation framework should be based on China's domestic conditions and all financial businesses will be put under supervision, according to Premier Li Keqiang.

The world's second largest economy will further open up its financial market to promote the internationalization of the Chinese yuan and capital account convertibility in a steady pace, Xi added.

China will also increase efforts in improving legal framework, credit mechanism and talent development for the financial sector to help Chinese economy expand steadily, Premier Li said.