Chen Jia | Beijing | January 8

China Daily - Premier Wen Jiabao has urged the financial sector to strengthen its capability in supporting the production of goods and services and to prevent artificial factors from inflating the economy.

China should set up a long-term mechanism that will make sure the "real economy" gets sufficient investment for growth, to strengthen the foundation for economic growth in the post-crisis era, the premier said. He was speaking at the end of the two-day National Financial Work Conference on Saturday in Beijing.

"In future, China will stick to the principle of having the financial industry serve the real economy to prevent virtual bubbles from inflating the economy," Wen said.

The real economy is defined as production activity in sectors such as agriculture, manufacturing and service, which is the basis of a country's GDP.

China's financial system is running on a stable course despite the global financial crisis, he said. However, apparent problems and potential risks still linger and the crisis is not over, Wen said.

"China's economy has maintained stable and relatively fast growth with stabilized consumer prices and improvement in people's lives. The financial system is running steadily. The positive momentum of economic and social development remains unchanged.

"We have the confidence, capability and conditions to move economic development to a new stage," he said.

The conference mapped out the blueprint for financial reform in the next five-year period. Similar conferences were held in 1997, 2002 and 2007 which led to significant policy changes, including the reform of large commercial banks that increased their capabilities of guarding against risks.

China has resolutely pushed forward a series of financial reforms which have set significant milestones. Large commercial banks improved their risk management capabilities remarkably, Wen said.

"We should note especially that the global financial crisis has not ended. We should strengthen our awareness of risks and responsibilities in order to push financial capabilities to new levels."

Wen voiced his support for the development of financial innovation, but stressed that this should not escape supervision.

"Risk-aversion should be the lifeline of our financial work," he said.