In its meeting on the development of the financial sector in Beijing on Tuesday, the State Council, China's Cabinet, stressed that the country should further improve its financial supervision, reform financial institutions, optimize the structure of its financial organizations, strengthen its financial risk prevention and control mechanism, and develop inclusive, green and digital finance to pave the way for the establishment of a modern central bank system.

China's efforts to establish a modern central bank system are in stark contrast with the limitless quantitative easing policies of some developed countries which are generating huge financial risks.

A modern central bank system will guarantee a reliable and connected financial service system featuring effective supervision and systemic risk prevention and control, while the latter results in the monetization of fiscal deficits. Although that might boost growth in the short term, it aggravates inflation, widens the wealth gap and accumulates tremendous risks in the financial system.

The Chinese financial watchdog's tightened supervision on internet finance, virtual currencies and the stock market demonstrates the country's resolve to prevent the development of its financial industry from deviating from the right track.

Also, the country will be vigilant to the increasing uncertainties and risks from home and abroad. To deal with capital speculation and arbitrage is by no means to suppress the burgeoning of private capital, but to avoid the accumulation of risks in the financial sector.

It is predictable that the country will tilt more capital to industries related to carbon emissions reduction, technological innovation and small and medium-sized enterprises so as to promote a virtuous circle in finance, technology and industry.

China has already initiated its financial preparation for high-quality development in the post-pandemic era. That's why the State Council has urged the relevant institutions and policymaking bodies to draw lessons from the developed countries' policies after the 2008 international financial crisis.

On the one hand, China's financial reform will establish a modern financial institution system that is highly adaptable, competitive, and inclusive in accordance with the principles of marketization, rule of law, and internationalization.

On the other, the country's financial sector will continue to open up to foreign financial agencies and capitals, as well as private capital at home.

That being said, China will effectively reform its financial system to support the real economy and green and innovative development.