China is revamping troubled financial sector

Ten guidelines support transition to consumer-driven economy.

The State Council said the guidelines will maintain a prudent monetary policy and a reasonable money and credit supply to support economic restructuring after a hefty cash squeeze sent interbank borrowing rates to record highs in late June.

It also pledged to press ahead with financial reforms and strike a balance between stabilizing economic growth, adjusting its economic structure and guarding against financial risks. It noted that the economy is generally stable but there are outstanding structural problems.

“A misallocation of capital is challenging the country's financial system," it said.

The guidelines call for channeling credit to the real economy, or that part of the economy concerned with actually producing goods and services, as opposed to the buying and selling in capital markets and inviting private capital to the financial sector.

The China Banking Regulatory Commission was mainly responsible for drawing up the guidelines, having consulted with the People's Bank of China, the central bank, China Insurance Regulatory Commission, China Securities Regulatory Commission and 13 government departments. It also solicited opinions from local governments and experts.