Wen says China cannot grow alone

Wen told the World Economic Forum in Dalian on Wednesday that China needs more domestic consumers [Reuters]

The Chinese premier has said while the global economic downturn has not affected his country’s economic fundamentals, China cannot grow alone.

In a speech at the opening day of the World Economic Forum in the Chinese city of Dalian on Wednesday, Wen Jiabao said the world’s second biggest economy “cannot operate in an isolated way, and will look at ways to develop global and domestic growth”.

He said he is confident that “China is fully able to to have the conditions in maintaining relatively fast economic growth”.

China has much influence on the economic markets of the world, but recently China has been criticised for focussing too much on driving export demand and keeping its currency weak to achieve that end.

Wen said “China would now aim to boost domestic demand”, but China’s slowing economic growth was a result of the government’s tightening measures to bring inflation under control and was “within expectations”.

“We will keep overall price levels basically stable and prevent big swings in economic growth,” he said.

The Chinese economy grew by an annual 9.5 per cent in the second quarter, slowing from 9.7 per cent in the first quarter.

Growing asset bubbles

Analysts expect the central bank to hold off further monetary tightening as the global economy slows, though it is still far from easing policy due to fears of growing asset bubbles that could spin out of control.

China has raised interest rates five times since late last year,
and the required reserve ratio nine times.

Wen called for greater global confidence and closer co-operation to face the challenges.

“Currently, the global economy is slowly recovering, but
instability and uncertainty are growing, unemployment rates in the major economies continue to be high, and emerging economies face rising inflationary pressures,” he said.

China is willing to invest more in European countries but they needed to prevent the debt crisis from spreading, said Wen.

But Wen also called for European countries to recognise China as a market economy.

Joseph Cheng, a Hong Kong-based economic analyst, told Al Jazeera that Wen’s speech showed that China is prepared to take the lead and help Europe’s economy, but only if they help themselves.

“Chinese leaders want to help the international community, as China would want to diversify and help Europe, but only if Europe makes those difficult decisions to reduce their debts as well,” Cheng said.

With about a quarter of its record foreign currency reserves of $3.2tn held in euro assets, China has been unsettled by the risks to the euro, even though Chinese leaders have repeatedly said they believe Europe can conquer its woes.

The US should safeguard investors’ interests and open up its markets to Chinese companies, he said.

Nevertheless he has confidence in the full recovery of the US economy, Wen said.