China Economy

Sovereign wealth fund chief calls on government to respect law

With liberals pushing for reform to boost the administration's credibility, Lou Jiwei says government departments must follow laws

PUBLISHED : Sunday, 27 January, 2013, 12:00am
UPDATED : Sunday, 27 January, 2013, 5:33am

Chinese sovereign wealth fund chief Lou Jiwei yesterday urged the government to show greater respect for the law.

"When we talk about governing the nation based on law, government departments must first govern themselves based on law," Lou, chairman of the China Investment Corp, told a forum held by the China Centre for International Economic Exchanges.

Lou's comments reflect growing calls from Chinese liberals to push forward with legal reform, which many believe is critical to improving equality, reducing corruption, boosting government credibility and further freeing markets during the next decade.

On Wednesday, premier-in-waiting Li Keqiang said that the government's No 1 duty was to provide a safe, level playing field, governed by law, for business.

Lou is seen as a candidate to succeed Xie Xuren as finance minister in March. A key member of former premier Zhu Rongji's brains trust, Lou played a major role in reforming the country's economic and tax systems in the 1990s.

Newly elected Communist Party leader Xi Jinping pledged a few days ago to crack down on corrupt officials as part of his war against graft.

Citing Xi's vow to "confine officials' power within the cage" of a regulatory system, Lou said that respecting contracts was vital for protecting the market dynamics needed for long-term growth.

For example, he questioned a controversial government decision to drop highway tolls during national holidays and weekends, saying this was an example of disrespect of contracts with highway investors. "Do we need to compensate their losses after wiping away their revenues?" he asked.

Lou said the government should avoid "populist tendencies" while working to improve social equality.

Meanwhile, he said the global economy this year would "feature a modest, twisted and gradual recovery".

The main issues to monitor included the US federal debt ceiling and European integration, he said. He expected developed nations to maintain quantitative easing policies indefinitely.

The continuing global economic restructuring and correction, however, would offer many investment opportunities for countries flush with cash, such as China, he said.

Lou called on the government to grant companies the freedom to invest abroad - not to just buy commodities or technologies but to meet growing consumption demand from emerging markets such as Russia, Africa and some Asian countries.