Building Brics: Wen Jiabao gave an upbeat assessment of China's economic prospects yesterday, insisting the country would meet growth targets despite difficult external conditions.
Wen Jiabao tries to dispel fears over China slowdown
TIANJIN, CHINA // Wen Jiabao gave an upbeat assessment of China's economic prospects yesterday, insisting the country would meet growth targets despite difficult external conditions.
Speaking at the World Economic Forum's "Summer Davos" gathering, the Chinese premier countered critics who have predicted the world's second-largest economy is set for heavy downturn in growth as Europe, a key export market, faces the prospect of a second recession.
"Some people have doubted whether the Chinese economy will stay on an upturn as the global economy goes downward … We have the ability to keep our economy in good shape," he told an audience of 2,000 delegates.
Despite trade data this week showing imports had slowed, following six successive quarters in which growth had weakened, Mr Wen said he did "not agree with the argument China's growth has come to an end after 30 years of reform and opening up".
Several banks have lowered their predictions for China's GDP growth this year, among them Barclays, which on Monday replaced its forecast of 7.9 per cent with a revised figure of 7.5 per cent, which is also the Chinese government's target for this year.
Other figures out this week showed imports into China for use within the country, rather than for re-export, had fallen 7.5 per cent, suggesting weakening domestic demand.
While conceding growth had slowed in the face of "more difficulties to China's economic development" that have, among other things, "seriously affected" exports, Mr Wen said growth was now "more stable".
He said the government had a 1 trillion yuan (Dh580 billion) surplus so far this year and a 100bn yuan stabilisation fund that could be used to stimulate the economy.
To bolster growth, authorities have adjusted tax rates, reduced bank required reserve ratios and cut interest rates twice.
This month, the country also approved a host of infrastructure projects.
"We give great priority to stabilising growth," said Mr Wen. "I have full confidence that the target for China's economic development this year will be met."
He also indicated China's economic expansion would not be derailed by external pressures, chief among which has been the crisis in the 17-member euro zone, which has weakened demand for Chinese goods in the country's largest export market.
Fears have grown Europe could slip into recession again as growth there stutters while governments continue to grapple with the sovereign debt crisis.
Much of the talk at the Summer Davos forum has centred on how Europe's economic woes could impact on China which, thanks to a 4tn yuan stimulus programme, from 2008 on has managed to maintain high growth rates despite the global slump.
Also speaking at the forum, the IMF deputy managing director Zhu Min, a former World Bank and Bank of China economist, warned there was "some way to go" before the financial crisis would be resolved.
Europe's importance as an export market for Asian goods meant a further downturn in Europe would have global repercussions.
"When the growth in the euro area drops to zero, you will see export growth from this region drop to zero, too. This is very important," he said.
He warned he did not think "China alone can save the world economy", not least because consumption levels in the country were relatively low, so even significant growth in percentage terms would not have a major impact globally.
The situation in the euro zone is however "moving in the right direction", he said.
"We should have confidence and we should have confidence in the euro," he added.
Among the overseas heads of government in Tianjin yesterday was the Danish prime minister, Helle Thorning-Schmidt, who admitted Europe was "very challenged" but encouraged investors to look to the continent.
"When Europe shows the first signs of recovery, which we will do next year, the rest of the world should push this movement," she said.
"It will not be just for the benefit of Europe but also for the world. Invest in Europe, trade more with Europe, believe Europe will recover."
Mr Wen said within China, domestic consumption had largely held up despite slowing growth in exports and investment, a key factor for optimism.
"I see the Chinese economy going towards a soft landing of about 8 per cent [growth] towards the end of this year," Mr Zhu added.