This groundwork in dealing with the problem was laid at the financial work conference. The authorities are trying to make substantial breakthroughs in introducing competition, assigning the roles of different service suppliers and establishing strong financial supervision.

Another vital item on the conference agenda was boosting the development of the capital market.

Since China's capital market cannot offer enough financial tools for investors with different investment plans and different levels of risk tolerance, capital is poured into stocks, producing bubbles on the stock market. The result is a market characterized by dramatic ups and downs.

Far from being the major channel for corporate financing, the stock market does not have adequate binding power over the publicly traded enterprises. The share price often has nothing to do with an enterprise's performance. The stock market is, therefore, turned into a field of speculation.

The decision-makers are determined to nurture the bond market and the insurance market. The goal is to diversify the sources of corporate financing and ease the pressures on the banking system. A sound capital market would help the imbalances in economic development.

A new strategy of macro control over the economy was also raised at the conference to reduce the negative economic influence posed by excessive liquidity.

Interest rate and exchange rate reforms would be promoted to ensure that the monetary polices hit home.

Medium and small businesses and those engaged in high-tech sectors would get favorable treatment in applying for bank loans. This would be part of the national effort to encourage the manufacture of products with higher added value.

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