Abstract <br/>&nbsp; <br/>We examine the role of China!ˉs financial sstem in supporting economic growth, and explore <br/>directions of future development.&nbsp; First, the current financial system is dominated by a large but inefficient <br/>banking sector.&nbsp; Reducing the amount of non-performing loans among the major banks to normal levels is the <br/>most critical task for reforming the financial system in the short run.&nbsp; Second, the role of the stock market in <br/>allocating resources in the economy has been limited and ineffective.&nbsp; Further development of China!ˉs<br/>financial markets is the most important task in the long-term.&nbsp; Third, the most successful part of the financial <br/>system, in terms of supporting the growth of the overall economy, is a non-standard sector that consists of <br/>alternative financing channels, governance mechanisms, and institutions.&nbsp; This sector should co-exist with <br/>banks and markets in the future in order to continue to support the growth of the Hybrid Sector (non-state, <br/>non-listed firms).&nbsp; Finally, in order to sustain stable economic growth, China should aim to prevent and halt <br/>damaging financial crises, including a banking sector crisis, a real estate or stock market crash, and a !°twin<br/>crisis!± in the currency market and banking sector.&nbsp; <br/>