Risk management and regulation is a vital link in China's development of inclusive finance, said Zhou Xiaochuan, president of China Society for Finance and Banking, at the 2019 International Forum for Financial Inclusion in Beijing on Saturday.

"Apart from the construction of regulatory mechanisms and financial institutions' risk management capabilities, we should also provide more safeguard measures to lower risks associated with inclusive finance," said Zhou, who is also former governor of the People's Bank of China, the country's central bank. "Financial institutions, whether large or small, should make stronger and better efforts in terms of their financial management regulations, the establishment and implementation of accounting standards, and risk assessment."

He noted that emerging technology companies have not paid ample attention to the risk and vulnerability of financial inclusion, and some of them learned lessons the hard way.

China should take further actions to reduce risk in this regard, such as making differentiated monetary policies and developing insurance services to withstand various types of risk, so that inclusive finance will cover a wider scope of clients at more reasonable prices. For instance, if insurance companies offer insurance policies against climate disasters, pests and diseases, an insured credit mechanism could be built on agricultural product orders, he said.

The government also needs to improve financial infrastructure to provide healthier and more reliable public services to diversified financial institutions, especially small- and medium-sized ones. The construction of certain infrastructure could adopt public-private partnerships, which involve collaboration between a government agency -- such as the Ministry of Finance, the People's Bank of China and financial regulators -- and a private sector company, he added.

Delivering a keynote speech at the forum highlighting inclusive, healthy and responsible finance, Zhou stressed that how to maintain financial sustainability is one of the major lessons for China to learn from its past experience of promoting financial inclusion.

In rural areas, it is important for rural credit cooperatives and farmers to reach a consensus on mutual benefits and prosperity, rather than having a zero-sum mindset. During the process of supporting rural household development, rural credit cooperatives must have reasonable financial returns and set reasonable prices to reflect risks, so that the cooperatives will remain financially healthy and keep growing hand in hand with the real economy, the part of the economy that produces goods and services, he said.

Zhou advised policymakers to thoroughly inspect policy incentives for financial inclusion, and strike a balance between incentives and social responsibility.

"If incentive mechanisms are not rationally designed, it will affect the financial sustainability of inclusive finance and the direction to which enthusiasm for this field is devoted. In a worse-case scenario, it may even encourage irregular financial activities under the guise of promoting financial inclusion," he said.