The Third National Financial Work Conference is ushering in a new phase in the development of China's financial industry.

By unveiling a package of policies to improve financial health, it has laid down a crucial reform agenda to underpin fast and sound national economic growth and social development.

A decade after a financial crisis swept Southeast Asia and five years into its World Trade Organization membership, China has surely accumulated extensive experience on financial reform and stability.

The successful market listings of three of its "big four" State banks in the past two years epitomizes the bold and firm steps China has taken to advance financial reform.

Few investors had been optimistic about the prospects for State-owned banks when China promised, upon its entry into the WTO in 2001, to fully open its banking sector to foreign banks in five years. That was just months before the Second National Financial Work Conference,

But now, the Chinese government's unprecedented efforts to boost market-oriented banking reforms have made the banks a favorite of investors at home and abroad. The latest statistics from the China Banking Regulatory Commission show that domestic commercial banks cut the ratio of non-performing loans to 7.51 percent last year from the double-digit level several years ago.

The country's financial reforms have also achieved significant progress in many other areas, including standardizing and revitalizing the domestic stock market, developing the insurance sector, and increasing flexibility in the foreign exchange regime.

In spite of all these achievements, the Chinese authorities remain focused on the problems facing the country's financial industry, demonstrating a sober mind as they did when the First Financial Work Conference was held during the 1997 Southeast Asian financial crisis.

As the financial industry plays an increasingly important role in the Chinese economy, it is necessary to keep a vigilant eye on potential financial risks.

In comparison with their own past performance, Chinese banks have admittedly improved. Yet, with international best practices as the benchmark, domestic banks still have a lot to do to improve their performance and governance.

That is why Premier Wen Jiabao vowed at the two-day conference to deepen the reform of State-owned banks, with special attention to optimizing corporate governance and pushing forward grass-roots reform in local branches.

Another priority for the Chinese government is to facilitate rural financial reforms.

If the country is to effectively narrow the development gap between urban and rural areas, essential in building a harmonious society, a functioning rural financial system must be in place as soon as possible.

There is a national consensus that only when the financial demands of rural China are properly served can all the supportive policies the government has put in place to boost rural development function effectively for farmers.

(China Daily 01/22/2007 page4)