The closure of Guangdong International Trust and Investment Corp (Gitic) underscores the importance of strictly observing rules in doing business in the mainland, Guangdong governor Lu Ruihua said in his first public remark on the issue. In an interview with three pro-mainland newspapers, Mr Lu said Gitic was closed by the People's Bank of China and its two Hong Kong subsidiaries put into liquidation because of its 'chaotic internal management'. The lesson to be learnt from the incident, he said, was that financial systems should be run by market forces and regulations, with no exceptions. He said it was inevitable that there were problems stemming from the transition from a planned to a market economy, such as smuggling, tax evasion and corruption. These issues could not be solved overnight and would present a long-term and difficult task for the government, Mr Lu said. He said that the bubble economy created in Guangdong was the result of over-exposure to the property market, overlapping development, the use of short-term loans to finance long-term projects and irresponsible fund raising. He said the provincial government would make all possible efforts to revamp the financial sector, prohibit irresponsible foreign debt raising and take action on financial institutions which acted irresponsibly. Meanwhile, Guangzhou vice-mayor Li Zhuobin said the municipal government was preparing to cut its links with business enterprises. Mr Li said the move should not have an adverse impact on its window company Yue Xiu.
