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President Wen: Pop the Bubbles for Real Investment
9 January 2012
A Government Financial Work Conference in Beijing concluded Sunday after two days of deliberation on the present financial situation facing the nation. The last such conference was held five years ago, and a number of issues were being debated with regard to the ongoing economic crisis. Premier Wen Jiabao addressed the last day of the conference, summing up the general orientation of the Chinese Government. The gist of his comments was best summed up by the Xinhua English language coverage of his speech, "Pop the bubbles for real investment." While assuring his audience that the financial position of the Chinese was strong, he laid out the bottom line for any financial reform: "The financial structure must serve the basic needs of the real economy." "We should especially note that the global financial crisis has not ended. We should strengthen our awareness of risks and responsibilities in order to push financial work to new levels," Wen said. Again and again, he reiterated the need for "risk aversion." This included wariness about the in- and out-flows of international funds, a watch over the banking system as well as the insurance system. He also expressed concern over the continued danger of inflation. In particular, he expressed concern about the increasing liabilities of provincial and local governments. While much of their accumulated debt has been in the form of infrastructure investment, the values of some of these "investments," in particular, in housing, have been subject to heavy speculation. Wen called for close supervision of the debt situation for the local governments in order to avoid problems that might affect their ability to function. Wen also expressed concern, as he has been doing recently, for the situation in the countryside, in particular, for the difficulty of farmers and rural entities to get the necessary credits they need. The conference had looked at a number of important issues concerning risk management, bank capital replenishment, asset management of the state-owned enterprises, risk in the housing markets, and possible "too big to fail" issues. While there are already regulatory agencies in the banking, investment, and insurance industries, there is also a proposal for the creation of a Government body that would serve as a financial assets supervisory institution. This proposal could, however, meet with some resistance from some circles, according to some Chinese analysts. |