China is certainly on solid financial footing, but the country's top leaders are urging further reforms to better improve its market economy.

The third national financial work conference, held in Beijing on January 19-20, unveiled a series of policies aimed at improving the country's financial health. Premier Wen Jiabao announced at the conference that breakthroughs should be achieved in the reform of policy and state-owned banks, the design of rural financial mechanisms, the establishment of a multi-level capital market and foreign exchange administration.

In his speech, Wen said that China's financial industry had witnessed historical changes since the last conference was held in 2002.

"However, quite a number of problems and contradictions still exist," he said. "We must attach great importance to these problems and take forceful means to solve them."

Commercialize policy banks

China Development Bank (CDB), one of China's three policy banks, will take the lead in commencing commercial operations. This is the first time China has officially announced the reform of policy banks, which also include the Export and Import Bank of China and the Agricultural Development Bank of China.

CDB's commercial operation will focus on mid- and long-term business, said Wen at the meeting. Public bidding will be introduced into the financial business previously commissioned by the government to policy banks.

The reform measures for the three policy banks will be made in line with their own conditions. China will also promote reform of other commercial banks and financial asset management companies in due course, said Premier Wen.

Traditionally, policy banks focus on granting loans to government-encouraged projects. Through commercialization, they will make decisions based more on profitability, while facing more stringent supervision.

"The commercialization of policy banks is necessary with the progress of economic and financial reforms," said Han Meng, a financial expert from the Chinese Academy of Social Sciences.

He noted that the poor performance of policy banks would burden the national economy as a whole. Reform will make the market play a more important role in their operations, but their function as policy lenders will remain.