sufficient capital, strict internal control, safe operation, good services and profitability. first, china will continue to conduct the share - holding reform of the wholly state - owned commercial banks, and deepen rural credit cooperatives reform, promote city commercial banks, city credit cooperatives and non - banking financial institutions to restructure and consolidate, encourage private funds to participate in the restructuring of urban credit cooperatives and city commercial banks, promote assets management companies market - oriented operation, restructure and consolidate securities companies and improve insurance companies reform so as to establish a multi - layer financial institutional system. second, efforts will be made to further improve corporate governance of the financial institutions and strengthen internal control system. we will promote financial institutions'ownership structure reform, establish incentives for the financial institutions to introduce strategic investors, board of directors, management and market participants and put in place risk management system and internal control system. third, financial innovation will be fostered. financial institutions should enhance their financial innovation and strengthen their pricing capability. commercial banks need to pay attention to developing their fee - based business ; securities companies need to develop seller's business ; insurance companies need to diversify investment channels and cultivate sustainable growth model. supervisory authorities need to provide policy to support financial innovation. ( 3 ) optimize financing structure and improve capital markets. efforts will be made to promote capital markets reform and stable development. in particular, historical burdens will be properly dissolved and institution building will be strengthened. bonds market will be further developed and pilot - program of credit securitization will be conducted, corporate bonds market will be developed, capital market structure will be improved and capital market instruments will be diversified. besides, we will improve interactions among the money market, capital market and insurance market to maintain broad stability of financial operation and financial market. ( 4 ) strengthen financial risks monitoring and early warning. risks of banks, securities firms and insurance companies as well as the cross - sector, cross - country and cross - region risks will be closely monitored. financial stability indicator system and early warning 4 / 5 system will be established to improve the monitoring and assessment of financial vulnerability and enhance monitoring and warning of financial risks. to strengthen the monitoring and prevention of systemic financial risks, the pbc will periodically issue financial stability review from 2005 to evaluate the financial system risk profile in china. ( 5 ) accelerate the establishment of financial safety networks. financial safety networks include prudential financial supervision, central bank's lender of last resorts function

share - holding reform of wholly state - owned commercial banks made a big stride. both bank of china and china construction bank's financial situation improved significantly, with main financial ratios already close to that of the international big commercial banks and modern corporate governance mechanism beginning to produce good results. the financial restructuring of the industrial and commercial bank of china are basically finished and the icbc will be restructured to become a share - holding company within this year. the pilot reform of rural credit cooperatives has extended to 29 provinces ( region and municipalities ), with improved operation and strengthened capital quality. guidelines for restructuring of the securities companies have been clarified and preliminary results have been achieved in relevant reform areas. insurance industry has made great progress in reform and development with the restructuring of the stated - owned insurance companies basically completed. at the same time, china continued to fulfill its wto - entry commitments by further opening - up and reforming the financial industry. 5. financial infrastructure and financial ecological environment were improved gradually. modern payment and settlement system has been preliminarily established, and the building of financial legal system, financial institutions'corporate governance, accounting and auditing standards has achieved considerable progress. financial safety network has been preliminarily established as well, and prudential supervision was becoming increasingly important. the pbc and the mof have strengthened their coordination and information exchange with three supervisory commissions. the formation of financial stability coordination mechanism is underway, with insurance protection system and securities investors'protection system preliminarily established and deposit insurance system establishment initiated. at the same time, chinese government strengthened legal enforcement and accelerated the establishment of credit registration system to improve social credit culture and financial ecological environment. ii. concerns about financial system stability. finance is the core of modern economy and interlaced closely with economic operation. in the process of establishing socialist market economy as well as of reform financial globalization, the main concerns of chinese government about financial stability are focused on the following ten aspects. 1. economic growth model transformation. currently, economic growth is highly dependent on investment and export and the development of different industries is unbalanced. given changes in economic environment, industrial structural adjustments, deterioration of terms of trade, overheating in sectors like real estate industry, real economy's profitability and sustainable development may be affected, so as the sound operation of the financial institutions and financial markets. 2. coordination between direct and indirect financing. at present, direct financing develops rather slowly in china compared with the development of indirect