China guaranteed on Friday to continue with several reforms for capital market as it aims to promote more effective capital allocation, raise more foreign investments, as well as develop market transparencies.

The State Council mentioned in an all-inclusive report of policy principles that it would come up with a structure for the issuance of direct bonds by local governments, modernize the process of approval for initial public offerings (IPO), as well as eliminate several limitations on using financial derivatives.

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On a separate statement on Friday, new rules were issued by the Securities Association of China that involves IPOs.

Though the Chinese government has already talked about most of the reforms discussed by the cabinet, the announcement indicates a renewed commitment to push through with the said plans.

There will be increased quotas for the outward and inward overseas investment included in the Qualified Foreign Institutional Investor (QFII) as well as the Qualified Domestic Institutional Investor (QDII) programs, mentioned by the cabinet.

In a report released on its website, the State Council mentioned on Friday that the Chinese capital markets are still undeveloped, and that there are several existing systemic problems and new ones are surfacing that should be confronted.

The statement also said that they will continue with market-based course as well as law-based policies and implement open, fair, and equal market order.

The role of the State Council in China's process of making policies is to come up with principles and goals, and leaving the job to appropriate agencies like the China Securities Regulatory Commission to come up with more specific rules.

The State Council also pledged to fortify enforcement versus forged disclosures made by corporate bond issuers as well as the insider trading that happens on the bond market.

A crackdown on illicit fundraising customs is also in the works, according to the State Council.