China calls summit to discuss reform of financial sector stuck in Maoist era

Basking in the approval of international bankers over its industrial reforms, the Chinese government announced yesterday that it would be calling a summit in November to discuss reform of the financial sector, which, in many respects, remains stuck in the dark days of the Maoist era.

The announcement was made by the Chinese Vice-Premier, Zhu Rongji at a meeting on the fringe of the World/Bank International Monetary Fund Conference in Hong Kong.

Mr Zhu also announced that the government was backtracking on its decision to scrap tax breaks for capital goods imported by foreign companies based in China.

This follows a sharp drop in foreign investment this year, in part, triggered by fears that the climate for inward investment was turning sour.

Mr Zhu implied that the reintroduction of tax exemptions was tied to China's long-running struggle to gain entry to the World Trade Organisation [WTO].

"The timetable is not for us to decide, it's up to the WTO," he said.

"What is urgent now," commented Mr Zhu, who is often described as China's Economic Czar, "Is to set up a new investment system in which the roles of the government and the [State] enterprises are separated."

He also spoke of the need to open up the financial sector to greater competition.

Mr Zhu even had good news specifically for British investors, saying that insurance companies from Britain and Australia were next in line to obtain the scarce licences required to establish operations in China.

Referring to the turmoil in South-east Asian markets, Mr Zhu stressed that the government was paying special attention to financial risk.

The new conference, he said, would take important decisions about strengthening the controls and supervision exercised by the central bank to guard against risks.

Foreign banks, investment houses and insurance companies are queueing up to get into China. Mr Zhu cautioned them to "be patient".

In case his point was missed he switched from Chinese to English to make this remark.

He told the assembled moneymen: "You are welcome but please don't come too quickly."