(Yicai Global) Sept. 15 -- The relationship between finance and the real economy has witnessed profound changes as they developed in recent years, Sina Finance quoted Liu Guojiang, assistant governor of the People's Bank of China, as saying at the Financial Street Forum 2017 today.

The proportion of the added value of the financial sector to gross domestic product has risen rapidly, and some of the funds have stayed within the financial system for too long with the tendency of not serving the real economy, Liu said. Financial services can add to the real economy or take away from it, said Liu.

"More reductions should be made," Liu said.

First, China should curb leverage, and this is key to serving the real economy, he said.

"Asset prices are inflated by leverage, which raises the operating costs of the real economy," he said. "Some good enterprises that could not bear high costs were forced to move away because local housing prices rose sharply. The country must adhere to the prudent and neutral monetary policy to reduce leverage in an orderly way, which is the most important link to serve the real economy."

Second, the country should reduce financial chaos. "Illegal fund-raising, excessive leverage and off-balance sheet business and illegal arbitrage not only directly increase financial risk, but also do not serve the real economy," he said. "Reducing these would put a considerable amount of money back into the real economy naturally."

Third, "the money supply that is not in line with supply-side structural reform should be reduced, such as the money supply to zombie companies, the implicit local government debt and real estate speculation," Liu said.