Chinese government pledged financial risk control in its central economic work conference over the weekend. What does this mean and what could could we expect from the policies. Ming Tian explains.

China is facing higher financial risks this year. A boom in the real estate sector has attracted much capital, leading to additional speculation in financial markets.

On the other hand, China's open market is more subject to global forces. The foreign exchange rate for the Chinese yuan has been squeezed in recent months, tightening liquidity in money markets.

Analysts say the forex rate volatility will feed into financial risks, and Chinese markets should be less dependent on leverage, or cheap credit. 

Chinese leaders since October have vowed to curb financial risks and reiterated the issue in a statement following last week's central economic work conference. Experts say the mentioning could imply targeted measures in controlling the issuance of loans.

Another policy directive could be strengthened supervision. The statement also raised the issue of lifting regulation capacity, which requires higher standards for financial watchdogs.

Analysts say China's fast developing financial markets have given birth to various conglomerates with operations spanning from banking and securities to insurance and financial leasing.

Vice president of Development Research Center of State Council, Wang Yiming, said the ultimate way to lower risks is to raise the efficiency of economic growth. He said that as long as the investment could bring out enough returns, then there will be fewer risks accumulating. That will require higher output from the factories and services.