The country's premier also expresses concern about China's massive holdings of Treasuries and other US debt.
China 'could boost stimulus plan'
BEIJING // China's premier Wen Jiabao said today that Beijing is ready to expand its stimulus if the country's economy worsens. He also expressed concern about China's massive holdings of Treasuries and other US debt, appealing to Washington to safeguard their value. Although Mr Wen said he expected China and the rest of the world to be better off in 2010, he said the Chinese government was ready for tougher times.
Mr Wen noted that Beijing is the biggest foreign creditor to the US and called on Washington to see that its response to the global slowdown does not damage the value of Chinese holdings. "We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Mr Wen said at a news conference following the closing of China's annual legislative session.
"I would like to call on the United States to honour its words, stay a credible nation and ensure the safety of Chinese assets." Mr Wen's comments foreshadowed possible appeals to the US president, Barack Obama, who will meet with the Chinese president, Hu Jintao, at a London summit of leaders of the G20 group of major economies on April 2 to discuss the global financial crisis. Analysts estimate that nearly half of China's US$2 trillion (Dh7.3 trillion) in currency reserves are in US Treasuries and notes issued by other government-affiliated agencies. Washington is counting on China to continue buying Treasuries to fund its $787 billion stimulus package.
Last month, the visiting Secretary of State, Hillary Clinton, sought to reassure Beijing that government debt would remain a reliable investment. "They are worried about forever-rising deficits, which may devalue Treasuries by pushing interest rates higher," said JP Morgan economist Frank Gong. "Inside China there has been a lot of debate about whether they should continue to buy Treasuries."
The comments come as finance ministers and central bankers of the G20 gather in London this weekend to discuss the crisis and possible remedies. The US Treasury secretary Timothy Geithner is pressing for a new co-ordinated stimulus but European governments are reluctant to take on more debt before they see how current plans are working. The Europeans want to emphasise the need for greater regulation of markets, including a crackdown on tax havens and increased control over hedge funds.
In Beijing, Mr Wen expressed confidence that China can emerge from its slump "at an early date," and said the government is ready to expand its 4 trillion yuan (US$586 billion) stimulus to boost growth in the world's third-largest economy. Communist leaders worry about rising job losses and possible unrest amid a trade slump that saw Chinese exports fall 25.7 per cent in February from a year earlier. They have promised to spend heavily to create jobs and boost exports.
"We already have our plans ready to tackle even more difficult times, and to do that we have reserved adequate ammunition," Mr Wen said. "That means that at any time we can introduce new stimulus policies." *AP