China should moderate the pace of innovation in the financial industry and improve its risk control system amid the global financial crisis, academics told a forum in Shanghai yesterday.

They also said the crisis provided a good case for China to take stock when some Chinese financial firms were eager to go global and were too trusting of their foreign partners.

"We should carry out innovation in a very careful manner. Innovation in the financial sector is just a means to raise the profit margin of banks and brokerage firms. It is not the goal," said Huang Zemin, a finance professor at East China Normal University, at a forum organized by the Shanghai Institute of Financial Legislation and the Center for China's Financial History Studies at Fudan University.

"If innovation is risky, we had better delay or drop the attempt, especially when the global financial environment seems so gloomy at the moment," he said.

His view was echoed by Liu Hongzhong, dean of the Department of International Finance at Fudan University.

"China should have serious consideration and preparation before the launch of securities lending and other derivatives. Without a full understanding of their mechanism and impact, derivatives could be very dangerous to market stability," said Liu.

There was also a suggestion Chinese financial institutions should not blindly trust foreign partners and should control their pace in going global. "Foreign participation does benefit Chinese financial firms, especially in terms of corporate governance. However, Chinese banks and brokers can't totally rely on them for experience. Their systems also have loopholes, which are clearly shown in this crisis," said Huang.

He said the crisis had rung warning bells for China's big financial firms which were anxious to tap the global market but not yet ready.

(Shanghai Daily?December 4, 2008)