At the National Financial Work Conference held in Beijing January 19 and 20, new policies for the finance industry were outlined. The outcome can be expected to have a far-reaching influence on the sustainable development of China's economy.

After a boom of export-oriented trade for more than two decades, China has become a global trading power while its financial sector is still in the primary stage of development.

As a result, the excessive liquidity caused by the gigantic foreign exchange reserve cannot be cushioned by the financial system. The country is waking up with a big headache in maintaining economic growth.

Since China is still in economic transition, its fledgling financial sector is unlikely to copy the financial framework in developed economies. Hence, a financial reform tailored to the Chinese economy in transition saw its blueprint at the conference.

The sustainable development of the economy relies heavily on reforming its banking sector, which harbors the majority of the country's financial resources.

China's banks are weak in derivative financial tools and intermediary businesses. Therefore, most of them can only profit from making loans, which are subject to stringent limits in interest rates and exchange rates.

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