China faces most complicated year, keeping yuan stable

08:16, March 15, 2010      

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Chinese Premier Wen Jiabao answers questions during a press conference after the closing meeting of the Third Session of the 11th National People''s Congress (NPC) at the Great Hall of the People in Beijing, capital of China, March 14, 2010. (Xinhua/Ju Peng)

Chinese Premier Wen Jiabao said on Sunday that China is facing the "most complicated" economic conditions this year, and it will be "very cautious and flexible" in choosing the timing of the stimulus exist to shore up the hard-won recovery.

Since the world economy still faces the risk of "double dip", China has to strike a balance between maintaining economic growth, adjusting economic development model and managing inflation expectations, Wen told reporters after the conclusion of the annual parliamentary session.

As China has come under huge pressure for strengthening its currency, or yuan, Wen said China opposed to "fingerpointing" of its currency policy, and pledged to keep the yuan stable at an appropriate and balanced level.

"DOUBLE DIP" RISK

The complications facing the Chinese economy come from the tricky relations between its domestic economic targets and uncertainties in the global recovery, Wen said.

"Challenges and problems in the world economy have not been fully addressed, as major economies are plagued by high unemployment and debt crisis, which poses risk of a ''double dip''," Wen said.

As the world''s major economies still kept in the mires of recesssion, China staged a speedy recovery with a 8.7-percent economic growth last year, on the back of a 4-trillion yuan stimulus package and 9.6 trillion yuan of bank loans.

However, the runaway monetary expansion adds concerns of asset bubbles, posing a dilemma for the government to keep a smart intensity of the stimulus to contain potential inflation without derailing economic expansion.

"We must be very cautious and flexible on decision of stimulus exist in order to shore up the hard-earned economic recovery," Wen said.

He restated to maintain the continuity and stability of macro economic policy, or the implementation of the proactive fiscal policy and moderately loose monetary policy.

The government will make more efforts to keep its policies flexible while keeping close watch on domestic and international economic changes, he said.

Consumer price growth quickened to 2.7 percent in February, the highest in 16 months, and also neared the 3 percent full year target set by the government.

The government should properly handle the relations between maintaining economic growth, adjusting economic development model and managing inflation expectation this year, which the premier described as "a tough job".

Wen said agriculture is the life-line of the national economy, and it plays a decisive role in ensuring economic growth and managing inflation expectations.

Although China quickly emerged from the global recession on stimulus, chronical problems such as over-dependence on public investments and exports still existed.

Wen said a lot of Chinese enterprises have not witnessed improvement in performance, and rely on stimulus to keep them afloat.

Priority must be given to economic restructuring and transformation in development pattern to solve China''s economic imbalances, incoherence and unsustainability exposed in the crisis, he added.

Source:Xinhua

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