That the evolution of the supply side lags behind that of the demand side is the hard nut to crack for China's economy to develop in a healthy manner.

This is true for the financial industry, which is supposed to provide financial service to the real economy in an efficient manner, as the weekend National Financial Work Conference has noted. However, it has long been difficult for small and medium-sized enterprises to get funds from financial institutions.

When it comes to providing loans or other financial services, financial institutions need to work out ways to make sure their loans go to where the money is really needed and where the money will make a difference to the production of needed products.

They should abandon the fantasy that their old profit model, which is largely based on the State-controlled differences in deposit and loan interest rates, can be sustained.

Given the slower economic growth that is the new normal for China's economy, it is irrational and irresponsible for the banks to make profits by using their money in the form of financial derivatives that circulate within areas far away from the real economy.

The need to restructure the financial industry is no less urgent than upgrading the real economy. The financial institutions should form a multi-layer financial system that boasts comprehensive financing functions, with effective supervision over financial risks and protection of investors' legal rights and interests.

The days when the financial institutions could profit from the toil of others no longer exist. Now their profits will depend on how well they serve their customers, and how attractive their services and products are compared with those of their competitors.

The State-owned large banks as well as small and medium-sized banks and private financing agencies must expedite their strategic transition, with a view to improving the quality of their services and efficiency.

All financial institutions should speed up the transformation of their business models to reduce the cost of financing the real economy and create value in the service of economic and social development.