Wen stresses need to act before malaise spreads; sees positive signs in last quarter
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(BEIJING) China is considering additional measures beyond a four trillion yuan (S$885 billion) spending plan to boost its economy.
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| Cheers all round: Mr Wen (left) with British Prime Minister Gordon Brown at the UK-China Business Summit at the Institute of Directors in London yesterday |
The measures have to be taken pre-emptively before an economic retreat sets in, said Premier Wen Jiabao in a newspaper interview.
But he said that December had offered hope that things could be getting better.
China's economy grew at the slowest pace in seven years in the fourth quarter as global demand for Chinese goods plummeted.
Achieving growth of 8 per cent this year will be a 'tall order', Mr Wen said.
Nevertheless, speaking to London's Financial Times, he reeled off a list of measures - including massive infrastructure spending and handouts to consumers - which Beijing was taking to stimulate growth.
China's economy showed signs of improvement at the end of last year, Mr Wen said.
'During the last 10 days of December, it started to get better. The goods piled up in port started to decrease and the price of industrial products started to rise,' he told a business audience at a dinner during a visit to London.
Mr Wen was speaking just days after US Treasury Secretary Tim Geithner said that President Barack Obama believes that China is 'manipulating the value of its currency against the US dollar'.
The Chinese Premier confirmed to FT that President Obama had subsequently spoken to Hu Jintao, his Chinese counterpart.
Mr Wen said that the two leaders agreed to cooperate on common problems but he added that in the United States, there were 'different voices' - a reference to the anti-China protectionist sentiment in the Congress.
And although Mr Wen declined to rule out explicitly a devaluation of yuan, he stressed that Beijing intended to keep its currency stable at a 'balanced and reasonable level'.
He added: 'Many people have not come to see this point. . . If we have a drastic fluctuation in the exchange rate of the renminbi (yuan), it would be a big disaster.'
On the question of whether China would continue to finance US budget deficits by purchasing Treasury bills, Mr Wen was neutral.
He said that while China needed reserves for domestic purposes, it was also keen to maintain the value of its existing dollar holdings.
China is eager to maintain the value of its dollar holdings, the FT cited Mr Wen as saying; he said reform of the International Monetary Fund and the World Bank is a priority, the newspaper reported.
Meanwhile, the Chinese government will inject 200 billion yuan into the Agricultural Bank of China as part of its restructuring, Mr Wen told FT.
Central Huijin Investment Co, a unit of sovereign wealth fund China Investment Corp, invested US$19 billion in new capital into the bank in November in return for a 50 per cent equity stake, Agricultural Bank said yesterday.
The Ministry of Finance had previously invested US$11 billion in the bank, Agricultural Bank said.
Two of the world's largest money managers - BlackRock Inc and Barclays plc - believe that China's steepest monthly stock gain in more than a year shows the fastest-growing major economy will avert a recession.
China will do 'whatever it takes to stabilise the growth slowdown', said Richard Urwin, head of asset allocation at BlackRock in London.
This determination means China can enjoy 'faster growth than the rest of the world in 2009 and in 2010 as well', said Russ Koesterich, the San Francisco-based head of investment strategy at Barclays Global Investors in a Bloomberg Television interview on Jan 26. -- Bloomberg
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