Beijing: China’s Premier Wen Jiabao reassured the world on Friday that China would deliver on its promise of 8% growth in 2009 despite a slate of challenges, and could roll out extra stimulus spending if needed to meet the goal.
Wen also said he was closely monitoring the US economy and was concerned about the safety of Chinese assets there, which he called on Washington to protect.
But Beijing does not think depreciation of its yuan currency would be appropriate currently, even though its export sector is under huge pressure as markets in industrialised nations crumble. The government wants to see a stable currency, he added.
In an annual news conference on the sidelines of the National People’s Congress, China’s largely ceremonial parliament, Wen said that stopping growth slipping below 8% would be a struggle, but the financial system was basically healthy.
“I believe that there is indeed some difficulty in reaching this goal. But with effort it is possible,” Wen told journalists.
“After a decade of reform, China’s finance (system) is basically healthy and stable,” he added, reflecting the mix of caution and optimism which has characterised Beijing’s approach to the threat of the global financial crisis.
Beijing has also kept some of its powder dry in case the crisis worsens, even after rolling out a 4 trillion yuan ($585 billion) plan to expand and speed up government spending.
China’s ruling Communist Party has staked its claim to legitimacy on providing years of continuous economic expansion, so keeping growth at a minimum eight percent now tops its agenda.
Eight percent expansion is widely thought to be the minimum needed to hold down the jobless rate at manageable levels -- although the country is already struggling to find jobs for at least 20 million unemployed migrant workers.
Officials fear social unrest could flare if they remain out of work for long, or many more men and women join their ranks.
Wen said China had worked to diversify its foreign exchange reserves, the world’s largest at nearly $2 trillion, and that they were “safe overall”.
But he also sent a stark message to the United States, with most of Chinese FX reserves held in dollar-denominated assets and China the biggest holder of US government debt.
“Of course we are concerned about the security of our assets and, to speak truthfully, I do have some worries,” Wen said.
A collapse in exports and a slump in factory output growth in February surprised investors who had taken recent manufacturing surveys and electricity output data as signs that China’s economy, the world’s third largest, had already bottomed out.
But a sustained surge in bank lending since late last year has fuelled hope that ample financing is in place for the government’s stimulus package to gain traction.
With 10 months to go in 2009, China is already more than half way towards reaching its goal of at least 5 trillion yuan in new bank lending.
Retail sales also slowed in the first two months, though only slightly, suggesting that Chinese consumers, like the broader economy itself, remain in better shape than their counterparts in the rest of the world.