China will steadily reduce the number of subprime lenders to help prevent systemic financial risks, its central bank said on Wednesday.

Reforms of troubled small and medium-sized financial institutions have made key progress and illegal financial activities have slowed, the People’s Bank of China (PBOC) said in a statement after its annual meeting on financial stability.

The central bank will continue to follow the guidance of “global planning and coordination, differentiated policies and precise bomb disposal,” he said.

“There is a need to strengthen the financial risk elimination mechanism and capacity building, strengthen surveillance, early warning and evaluation,” the PBOC said.

The central bank will improve legislation and the system of financial stability guarantee funds, as well as the role of deposit insurance, it added.

The Chinese economy showed a gradual, albeit uneven, recovery in the first two months, but Fu Linghui, spokesman for the Bureau of Statistics, stated at a briefing on Wednesday that business and personal balance sheets damaged during the pandemic will need time to repair.

Central bank chief Yi Gang told a news conference on March 3 that China has reduced the number of small and medium-sized high-risk financial institutions to more than 300, up from more than 600 in the past three years.

The government has unveiled plans to create a new regulator, the National Administration for Financial Regulation, which will take over some of the PBOC’s regulatory responsibilities, such as oversight of financial holdings and investor protection.