"The steady operation of the financial sector is key to keeping economic fundamentals stable and economic circulation smooth," said Liang Tao, vice- chairman of the China Banking and Insurance Regulatory Commission (CBIRC).

Liang made the remarks while pointing out headwinds like pressure on RMB exchange rate stability due to monetary tightening in some developed economies, as well as higher raw material prices driven by global volatility and domestic COVID-19 resurgences.

Official data from the first quarter of this year shows that the banking and insurance sectors are capable of handling risks. The overall non-performing loan ratio of China's banks stood at 1.79 percent, slightly down from the beginning of this year. The solvency of insurance companies is also sound.

Risk levels are tame in some major sectors, said Liang. China is issuing sufficient loans to meet the financing needs of real estate developers, while the non-performing ratio of real estate loans is significantly lower than the overall ratio. Risks related to inclusive loans to small and micro firms are also well under control, Liang added.

"China's fundamentals for economic resilience, internal growth momentum and long-term growth will not change," Liang said.

He said the CBIRC will continue to fend off financial risks while cranking up support to the real economy amid COVID-19 control.

Liang pointed out that COVID-19 disruptions have dampened financing needs for many companies, especially since April. Some other firms have faced difficulties to make loan repayments on time, posing the threat of more bad loans and financial risks.

In response to these challenges, the CBIRC is urging faster implementation of already formulated supportive policies that will improve and expand the credit supply.

Major state-owned banks aim at a total of 1.6 trillion yuan ($239.2 billion) of new inclusive loans to small and micro firms, while banks across China are directed to lend more to agricultural causes and grain producers, according to Liang.

For COVID-19-hit sectors, the CBIRC will require banks to renew loans or defer repayments without penalties for eligible small businesses, and adjust car loan or mortgage repayment schedules in favor of truck drivers. It will also instruct insurance companies to indemnify COVID-19-induced business losses and develop more products for freight transportation.

Liang said more attentive and accessible financial services will be extended to hard-hit areas like the city of Shanghai and Jilin province.

China has made solid progress expanding credit issuance and improving the structure. New loans issued in the first quarter stood at 8.6 trillion yuan, up 445.5 billion yuan from a year ago. Outstanding inclusive loans to small and micro firms climbed 22.6 percent year-on-year, while outstanding loans for high-tech industries topped 7 trillion yuan.

The country also reduced the interest rates of new business loans and inclusive loans issued in the first quarter by over 0.2 percentage points each compared to the beginning of this year to lower financing costs for companies.