Issues pertaining to the real economy, systemic risks, financial reform and the further opening of the financial sector were identified as highlights of the recent National Financial Work Conference.

Convened every five years since 1997, the conference was held from July 14 to 15 in Beijing, setting the tone for financial reform in the next period.

Wang Wen, executive dean of the Chongyang Institute for Financial Studies under Renmin University of China, said that the conference is a big event marking the extension of China’s comprehensively deepening reform to the financial realm.

Serving the real economy was prioritized among the three tasks designated in the meeting. “Finance is derived from the real economy and lives on it,” said Lei Jiasu, director of the Center for Enterprise Growth and National Economic Security Research under Tsinghua University, adding that the two are interdependent.

The conference proposed targeted measures to better serve the real economy, such as encouraging direct financing, improving indirect financing structures, and building an inclusive finance system.

Dong Yuping, assistant to the director of the Institute of Finance at the Chinese Academy of Social Sciences, pinpointed high difficulty and costs of financing for small, medium-sized and micro enterprises, and agriculture, farmers and rural areas, as the major hurdle hindering finance from performing its service functions.

To solve this problem, it is necessary to accelerate the construction of inclusive finance, further ameliorate indirect financing structures, and develop small and medium-sized banks or private financial institutions to provide services suited to small, medium-sized and micro enterprises, Dong said.

As a material part of state governance, financial security has come to the fore in recent years, and the conference placed more emphasis on this issue.

“In this critical stage that is full of opportunities, financial security is particularly needed to sustain and support China’s economic growth,” said Wang Fang, a research fellow at the International Monetary Institute under Renmin University.

Referring to international experience and lessons, Wang Fang said that the inability of emerging markets like Latin America and Southeast Asia to sidestep the middle income trap, to a large extent, is inseparable from the debt, banking and monetary crises that have occurred from time to time in the course of their development.

Therefore, coping with financial risks arising and evolving during growth model transformation and economic restructuring is the core task to maintain financial security, thus safeguarding the real economy, she added.

The Chinese financial sector is developing rapidly. However, under the current model, there is a lack of integration among its supervising entities, including the People's Bank of China, the China Securities Regulatory Commission, the China Insurance Regulatory Commission, and the China Banking Regulatory Commission. This relatively backward arrangement has led to rising calls for reforms in financial regulation.

One of the highlights of the conference is that a commission will be set up under the State Council to oversee financial stability and development.

Huang Zeming, director of the Institute of International Finance at East China Normal University, said that it is essential to place all financial businesses within a unified regulatory framework in order to enhance supervision efficiency.

This is why the Inter-Ministerial Joint Meeting for Financial Regulation and Coordination was established in 2013. The newly instituted commission for financial stability and development will lift financial regulation and coordination to a higher, more authoritative and effective level. “This is institutional innovation of financial regulation in China,” Huang said.

The further opening of China’s financial sector is needed to strengthen the nation’s global competitiveness, scholars argued. The conference proposed additional reforms to the RMB exchange rate regime to steadily advance the internationalization of the currency and gradually realize capital account convertibility.

Wang Fang noted that when the international economic and financial situation is uncertain, a higher degree of opening up will bring greater external uncertainties to a country’s financial security. The frequent crises in emerging markets are closely related to cyclic negative spillover effects from developed countries, she added.

Internationalizing the RMB steadily will improve China’s resistance to external shocks, thereby promoting the reform of the global monetary system and raising the voice of emerging markets and countries in global economic and financial activities, she said.