Chinese Premier Wen Jiabao said Wednesday that the government should allow private capital to enter the financial sector and make the process "standardized and open".

China's financial authorities are actively considering taking private financing activities in east city of Wenzhou as one of the pilots for an overall reform in this field, Wen told a press conference after the conclusion of the annual parliamentary session. [More about the press conference]

"We need to encourage their development, and at the same time put them under strict oversight and supervision," said Wen when commenting on the case of Wu Ying, a businesswoman who was once listed among the country's richest women and faced death penalty for cheating investors out of several hundred million yuan.

The 31-year-old former owner of the Zhejiang-based Bense Holding Group was convicted for illegally pooling 770 million yuan (123 million U.S. dollars) from private creditors between 2005 and 2007 to fund her own businesses.

"The Supreme People's Court is taking a cautious attitude toward the Wu Ying case," said Wen. The case caused nationwide debate as many small entrepreneurs, unable to get loans from banks, have turned to the underground market to finance their business expansion plans.

"The case must be handled on the basis of real facts," said Wen, who thought the case shows that private finance cannot meet the requirement of economic and social development in China.

Chinese companies, particularly small and micro ones, need access to funds, but the banks are not able to meet those companies' need and there is a large amount of idle capitals, he said.

Wen called for a thorough study on the issue that help provide clearly defined legal safeguards for private lending.