Premier of China between 2003 and 2013, Wen Jiabao served as vice-premier between 1998 and 2002. Wen, who was born in 1942, spent 14 years working in Gansu province’s geological bureau before being promoted in 1982 to vice-minister of geology and mineral resources. Wen graduated from the Beijing Institute of Geology in 1968 and has a master’s degree in geology. He was a member of the Politburo Standing Committee between 2002 and 2012.
Beijing sets out to burst bubbles
Beijing will curb financial speculation and reduce the nation's chronic misallocation of capital, while maintaining a flexible monetary policy in the face of global uncertainties, Premier Wen Jiabao says.
This led one economist to predict the government would raise interest rates this year, while another believes interest rates can go either way.
At the National Financial Work Conference in Beijing on Thursday and Friday, Wen stressed: 'We must ensure financial investments go to the real economy and alleviate the financing difficulties of the real economy as well as the high cost of capital.
'We must resolutely curb the flow of funds from the real economy to a bubble economy where money is speculatively used to produce profits. We must prevent the growth of a bubble economy and prevent the hollowing out of industries,' he said.
This year, the government will improve the nation's credit structure, with financing going to important projects, such as economic housing and small and medium-sized enterprises (SMEs) in government-supported industries, said Wen.
'There are acute problems and potential risks in our nation's financial system. Especially given that the global financial crisis is not yet over, we must increase our vigilance against potential problems, raising our financial system to a higher level,' Wen added.
The government would maintain a monetary policy that was stable yet flexible and forward-looking this year, Wen said. 'We will closely observe the economic situation abroad and domestically, and prepare the appropriate response against economic and financial risks,' he said.
Xiao Geng, research director of the Fung Global Institute, a Hong Kong think tank, said: 'Speculative investment is a real problem in China. Interest rates have been so low as to encourage speculation, but tight credit is hurting SMEs.'
The central government was likely to raise interest rates this year to discourage speculative activities, he said. 'There is so much uncertainty in the global economy, the Chinese government has to be careful and maintain a flexible monetary policy,' Xiao said.
However, Michael Pettis, an associate professor of finance at the Guanghua School of Management of Peking University, said different factions within the government were divided on whether to lower or raise interest rates.
Lower interest rates would increase speculative investment and the misallocation of capital, especially on infrastructure projects, but raising interest rates would slow economic growth, he said.
As the US and European economies faltered, the Chinese government had been trying to boost domestic consumption, Pettis said. 'There is a tremendous debate within China on the problem of capital misallocation. The unsustainable increase in China's debt is fundamental to the way the country's system works,' he said.
Wen stressed the nation's overall debt was safe and under control, with the bad debt ratio of banks at 0.9 per cent, 6.2 percentage points lower than in 2006. An analyst, who declined to be named, expressed scepticism about Wen's optimistic portrayal of debt situation.
Wen made no mention of the formation of an overall regulator to supervise state-owned financial firms, despite this being a topic of the conference.
Some analysts believe disagreements between regulators will be an obstacle to the formation of such a top-level watchdog.