U.S. Treasury Secretary Henry Paulson said in Shanghai onThursday that China had made strides in reforming its financial sector but needed to accelerate the process.

In his speech to Chinese officials and business leaders at the Shanghai Futures Exchange, Paulson said, "China's banking, securities and insurance sectors have all made substantial progress over the last ten years.

"China have recapitalized four of the top five state-owned banks and, more importantly, welcomed strategic investors and completed IPOs."

Paulson urged China to quicken economic reform.

He warned that China's underdeveloped financial markets were putting the country in a difficult position as it tries to balance between a centrally administered and a market-driven economy.

"China is faced with challenges in four areas: the capital market, institutional market and asset management, banking system and its regulatory regime."

Paulson encouraged China to loosen restrictions on foreign participation in the domestic capital market and health insurance sector, allowing Chinese banks to sell controlling stakes to foreign investors.

"China has come a long way in developing its capital markets, but the journey is not complete," said Paulson.

Paulson began his latest visit to China on Wednesday, in preparation for the second round of the China-U.S. Strategic Economic Dialogue scheduled for May in Washington.

Source: Xinhua