(Yicai Global) March 5 -- China's annual government report this year will stress that the financial sector continues to support the real economy, a senior official said on the sidelines of the annual session of the National Committee of the Chinese People's Political Consultative Conference, the country's top political advisory body.

China needs to balance financial risk prevention, said Yang Weimin, deputy director of the Central Leading Group on Financial and Economic Affairs, the core decision-making department of China's economy.

Guarding against financial risk does not mean giving up or relaxing support for the real economy, he added, saying the biggest risk is the financial system itself. China should control monetary supply to control credit growth and plug regulatory loopholes to strengthen oversight, instead of giving up and relaxing regulations, Yang said.

He believes the People's Bank of China will adopt a more proactive fiscal policy this year, and maintain a prudent and neutral monetary policy this year to ensure a moderately neutral monetary environment.

Yang also highlighted the risk of hidden debts within local authorities.

"Local governments should not over-borrow money or borrow implicit debt by other means," he said. "They should gradually reduce their existing debs."