Difficult year ahead for China admits Premier Wen Jiabao

China faces a difficult year as it works to maintain economic growth and spur development, but it would not be bullied into boosting the value of its currency, Premier Wen Jiabao said today.

In a wide-ranging press conference at the end of China's annual session of parliament, Mr Wen said Beijing was not ready to withdraw stimulus measures put in place in late 2008 to pull the world's third-largest economy out of the crisis, and denied criticism that China is keeping its currency undervalued in order to boost exports.

He also said that he would not allow the US to push China on the issues of China and Tibet, and claimed he was snubbed at last year's Copenhagen climate change summit.

Keeping the yuan stable was "an important contribution" to global recovery from the economic downturn, Mr Wen told hundreds of reporters gathered at the Great Hall of the People for his only formal press conference of the year.
"This year is going to be the most complicated year for the economy," he said.

"We will maintain the continuity and stability of our macroeconomic policies," he said, adding that as circumstances change, Beijing would make every effort to make its policies "more flexible".

During the two hour press conference, Premier Wen also repeated China's stance that a recent dip in relations with the United States was entirely the fault of Washington for allowing the Dalai Lama to visit the U.S. and approving the sale of arms to Taiwan.

"The responsibility does not lie with the Chinese side, but the United States," Mr Wen said. "We hope the U.S. will face the issue squarely ... so as to restore and improve China-US relations."

Speaking just after the country's annual legislative session ended with the approval of a budget that extends job-creation and welfare programs to deal with a rapidly expanding rich-poor gap, Mr Wen said

China had to be wary of a "double dip" recession this year as it sought to balance growth, economic structural adjustments and inflation expectations.

China "must have firm confidence" in dealing with any economic problems, he said. "The only way out and hope when facing difficulties lie in our own efforts," he said during the televised news conference

China, the world's third-largest economy, escaped the worst of the global financial crisis by ordering $1.4 trillion in bank lending and government stimulus.

Although economic growth bounced back to 10.7 percent in the final quarter of 2009, authorities say the global outlook is still uncertain, amid worries that the torrent of lending is adding to inflation and fueling a dangerous bubble in stock and real estate prices.

When asked if China would play a bigger role in international affairs, Mr Wen said China was still a developing country and was focused on improving living standards across the country.

He said the government would reform its controversial exchange rate controls but will keep its currency "basically stable." He gave no indication when Beijing might allow its yuan to rise against the US dollar — a move sought by Washington and other trading partners.

Critics say the yuan is kept undervalued, giving China's exporters an unfair price advantage and swelling its trade surplus. China has allowed a roughly 20 percent rise in the currency's value against the dollar since 2005, but re-imposed tight control after the global financial crisis hit.
Beijing has more than $800 billion of its foreign reserves invested in U.S. Treasury securities, and Mr Wen said the value of the U.S. dollar was a "big concern." He said he wanted to see the United States "take concrete steps to reassure investors," but gave no details of what Beijing wanted done.

Mr Wen promised to increase imports to promote trade and appealed to other nations to oppose what he said was rising global protectionism. He complained that some countries were trying to boost exports by weakening their currencies, but did not name any.

The budget passed by the congress called for a 10 percent rise in spending to fuel the economic recovery, with more money for low-cost housing, pensions, and other social programs for the country's 1.3 billion people.

The priorities extend Mr Wen and President Hu Jintao's years long efforts to spread the benefits of economic growth more broadly across a rapidly changing society. This year, inflation is a looming challenge, with housing prices soaring and worrying rises in food prices that consume as much as 40 percent of household incomes.

Mr Wen said inflation is a serious concern, along with endemic corruption and a yawning gap between rich and poor that leaves millions of migrant workers and farmers without basic government aid.

"These are enough to affect social stability, and even (affect) the consolidation of state power," he said.
Speaking of his perceived snub at Copenhagen in November, when China was blamed by some for undermining efforts to reach a binding he was criticized for skipping a meeting of top leaders attended by President Barack Obama, Mr Wen said he was never formally notified of the event and had sent Vice Foreign Minister He Yafei to register a protest. Wen said no explanation had been given about the failure to issue a formal invitation.

"So far no one has given us any explanation about this and it still is a mystery," he said.

http://business.timesonline.co.uk/tol/business/economics/article7061436.ece?token=null&offset=0&page=1

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Sunday, 14 March 2010