China's financial markets must be upgraded as part of a multifaceted reform, and not depend solely on freeing up interest rates and loosening the currency exchange rate, a senior banking regulator said on Nov 29.

Cai Esheng, vice-chairman of the China Banking Regulatory Commission, said an overhaul reform that contains supporting policies from other aspects of financial markets should be emphasized while promoting market-oriented financial reform.

He said the exit mechanism for financial institutions is crucial for further progress to further the reform. "But without complementary policies in social management and employment security, the effects of establishing regulations on institutions' exit and deposit insurance system would be much discounted," he said.

Cai made his remarks while attending a forum in Beijing held by Caijing Magazine.