China's premier says stimulus working, Chinese economy is better than expected
William Foreman, Associated Press Writer
BOAO, China (AP) -- Chinese Premier Wen Jiabao said Saturday the country's stimulus package is working and the economy is "better than expected," but he cautioned that complete recovery will take much more time because the global financial crisis continues to spread.
Wen, also China's top economic official, pledged to pull the country out of its slump by expanding domestic demand, building major infrastructure projects, finding jobs for college students and improving the social safety net.
Wen spoke at the Boao Forum, an annual gathering of government and business leaders on the tropical southern island province of Hainan. The theme of this year's conference, which organizers said drew 800 executives, was "Asia: Managing Beyond the Crisis."
The premier, the country's No. 3 ranking leader, said he was confident China could overcome the crisis but warned that global economic recovery will be a "long and torturous process."
"We should not lose sight of the fact that the international financial crisis is still spreading, the basic trend of world economic recession is not reversed," he said, adding that problems in the world's financial system were still unsolved.
But Wen said China was in relatively good shape because the country has sufficient capital, a solid banking industry, rich labor resources that will help it overcome the crisis.
The country's industrial output has gradually stabilized and there is "sufficient liquidity in the banking industry," he said. Investment growth is gaining speed, and consumption is growing "fairly fast," he said.
Wen's comments came just days after China announced its economy expanded at its slowest pace -- 6.1 percent -- in at least a decade in the first quarter.
But Wen said the sluggish growth figure was paired with numbers that show the economy is bouncing back from the slump. Industrial output, consumer spending and investment in factories were on the rise, he said.
"China's package plan is already paying off and positive changes have taken place in the economy," Wen said. "The situation is better than expected."
Some economists said the possible rebound was a sign that the government's 4 trillion yuan ($586 billion) in stimulus spending was beginning to kick in. But others are skeptical that a recovery has begun and say that sustained growth is impossible until consumer demand in the United States and other Western markets rebounds.
In recent months, Wen has taken aim at U.S. financial policy and Western financial institutions.
At January's World Economic Forum in Davos, Switzerland, he said the financial crisis was partly caused by a "blind pursuit of profit" and "an unsustainable model" of low savings and high consumption. He also accused banks of "a lack of self-discipline" and said regulators failed to keep up with new financial instruments.
Last month, Wen publicly appealed to Washington to avoid any response to the crisis that might weaken the dollar and the value of Beijing's estimated $1 trillion in Treasuries and other U.S. government debt.
China has recently begun calling for a new global currency to replace the dominant dollar. This has been seen as a growing Chinese assertiveness on revamping the world economy. It also further signals that China is uneasy about its vast holdings of U.S. government bonds.
On Saturday, Wen wasn't overtly critical of America. However, late in his speech, he repeated his belief that the world needed "a more diversified monetary system." He also urged business leaders to be responsible and "properly manage risks."
Organizers said this year's Boao forum attracted more than 800 people, including former U.S. President George W. Bush, Pakistani President Asif Ali Zardari and Finnish Prime Minister Matti Vanhanen.
Wen ended his speech by urging leaders to be confident and hopeful.
"Confidence is more important than currency or gold," he said. "Today, I want to say that hope is also important. It's like a beacon."