Chinese Premier Li Keqiang on Monday expressed strong confidence in the nation's ability to prevent systemic risk.
"We are fully capable of forestalling systemic risk," Li said when delivering a government work report at the opening meeting of the annual parliamentary session, citing sound fundamentals of the Chinese economy and the many policy tools at disposal.
China's economic and financial risks are on the whole manageable, Li said. "What China needs to do is to tackle both the symptoms and root causes and take effective measures to defuse potential risks."
Li vowed a serious crackdown on unlawful activities, such as in illegal fundraising and financial fraud.
"The country will strengthen coordination in financial regulation, improve regulation over shadow banking, Internet finance, and financial holding companies, and further improve financial regulation," he said.
Li stressed forestalling and defusing the local government debt risk.
"All forms of borrowing and debt underwriting that violate the law and regulations are strictly prohibited. Provincial-level governments should assume overall responsibility for debts incurred by local governments within their jurisdictions; governments below the provincial level should live up to their own responsibilities; and all must take active, prudent steps to deal with outstanding debt," he said.
The premier promised to improve the standard mechanisms for local governments to secure financing, noting that this year, local government special bonds issued would total 1.35 trillion yuan, an increase of 550 billion yuan year on year.
The special bonds will "be used as a matter of priority for financing the smooth implementation of ongoing projects; and the scope of the use of special bonds will be appropriately expanded," he said.
This year marks the 10th anniversary of the 2008 global financial crisis.
Prevention of financial risks is key for China to win what policy makers called the "three critical battles," namely controlling risks, reducing poverty and tackling pollution.
In July 2017, Chinese President Xi Jinping called for stronger financial regulation to contain risks at a National Financial Work Conference.
"Guarding against systemic financial risks is the eternal theme of financial work and the government should take stronger initiative to monitor, warn against and deal with risks in a timely manner," Xi said.
China will control local government debt growth, crack down upon financial irregularities and improve supervision on Internet finance, according to Xi.
Liu He, director of the General Office of the Central Leading Group for Financial and Economic Affairs, stressed financial risk control at the World Economic Forum in Switzerland in January.
"Shadow banking and hidden debt for local governments are serious problems we have to deal with," Liu said. "In about three years, we will strive to bring the overall leverage ratio under effective control, make the financial system more adaptable and better serve the real economy, prevent systemic risks and facilitate better flow of economic activities."
Shao Yu, cheif economist of Orient Securities Company Limited, said, "The [government work] report has sent a clear message that the government will strengthen supervision over shadow banking, Internet finance, and financial holding companies. I'm looking forward to seeing local governments and law enforcement departments implement their work."
ICBC International economist Cheng Shi also said that improving financial supervision over shadow banking, Internet finance, and financial holding companies could close loopholes and make sure that supervision covers the sector thoroughly.
Chen Jing, an NPC deputy from Shanghai, said he would make a proposal with focus on deepening reform in the financial sector.
Chen also called for more cooperation between financial supervision departments, public security departments, procuratorates, courts and local governments to strengthen cooperation in forestalling financial risks.