Staying with the forum. Deepening financial reforms and reining in financial risks were among the leading topics of discussion at the forum on Thursday. Ying Junyi has more.

Starting in April last year, regulators began ramping up financial supervision, targeting excessive interbank lending as well as the shadow financing that has helped some lenders -- -- especially small lenders expand aggressively. It is taking effect. Trust loans, entrusted loans and undiscounted bankers' acceptances, which are common forms of off-balance sheet shadow loans, showed a significant drop in May. Experts point out that, the extensive branch networks of larger lenders helps them pull in depositors, which helps them buffer the effects of deleveraging. But smaller lenders are faced with rising borrowing costs, weakened profit growth and increased solvency risks.

LIAN PING, CHIEF ECONOMIST BANK OF COMMUNICATIONS "The large influence of the deleveraging process on small lenders is continuing. The whole process leads to a shrinking in both assets and liabilities. But the scaling down of liabilities is more obvious, as small lenders find it difficult to lure deposits. And that creates difficulties for their operations. Their growth rate of deposits is 4% points lower than loans. The pressure is higher for small and medium sized banks, because they were the ones that grew so quickly previously. The tough supervision has led to the off-balance sheet assets contracting remarkably and created pressure on their liquidity."

Lian points out, however, that the central government has realized the difficulties small lenders are facing and is taking measures to help.

LIAN PING, CHIEF ECONOMIST BANK OF COMMUNICATIONS  "The central bank has been continually lowering the reserve requirement ratio, and that amounts to more than 1 trillion RMB. In addition to that, the collateral for MLF loans has been expanded, and that will ease the problem of inefficient collateral for small and medium sized banks. You can see the government is aware of the pressures and is adjusting its regulation measures accordingly."

On top of that, China's banking and insurance regulator issued revised guidelines last month for commercial banks' liquidity risk management. The regulations which will take effect next month divide commercial banks into two groups, those with assets over 200 billion and those below, and has implemented different supervision approaches for each group. Industry insiders like Liu Ligang, Chief China Economist at Citigroup, point out that small and medium sized banks may have to look for strategic partnerships, and with China further opening its financial sector, foreign banks might be an option.

LIU LIGANG, CHIEF CHINA ECONOMIST CITIGROUP "I think here in terms of the future small and medium banks we do think that many of them would have to raise more capital. And how do you do that basically local government will help to deleverage their excessively high ownership on small and medium banks. This include the future Chinese investors as well as foreign investers. We all know that at this moment foreign financial institutions now can have majority bank shares to fully own a bank. This also applies for brokerages, asset management and insurance company."

Defaults on Chinese bonds have risen sharply this year, according to a recent report by China Central Depository & Clearing Company. A total of 13 issuers have defaulted on 20 bonds so far this year. The majority of defaulting issuers are private companies, which were most affected by the shrinking of non-standard financing.