China yesterday pledged to take all necessary measures to stimulate its economy and fuel consumer spending but rejected as “ridiculous” suggestions that its huge pool of domestic savings was partly to blame for the global financial crisis.
In a rare interview, Wen Jiabao, premier, said in London that China was considering fresh measures to boost its economy beyond its Rmb4,000bn ($585bn) fiscal package launched late last year.
He told the Financial Times: “We may take further new, timely and decisive measures. All these measures have to be taken pre-emptively before an economic retreat.”
Mr Wen is on the fifth leg of a European tour aimed at reassuring trade partners that China will join the west in a co- ordinated effort to tackle the global economic crisis. Although Mr Wen declined to rule out explicitly a devaluation of the renminbi, he stressed that Beijing intended to keep its currency stable at a “balanced and reasonable level”. He added: “Many people have not come to see this point . . . if we have a drastic fluctuation in the exchange rate of the renminbi, it would be a big disaster.”
Mr Wen said China's economy had slowed sharply in the fourth quarter of 2008, with growth dipping to 6.8 per cent. He reeled off a list of measures — including massive infrastructure spending and handouts to consumers — which Beijing was taking to ensure economic growth reached “around 8 per cent” this year.
Mr Wen confirmed for the first time that Barack Obama, US president, had spoken to Hu Jintao, his Chinese counterpart, “the day before yesterday”, following comments by Tim Geithner, the new US Treasury secretary, that China was “manipulating” the value of its currency against the US dollar.
The two leaders agreed to co-operate on common problems, but Mr Wen said in the US there were “different voices” — a reference to anti-Chinese protectionist sentiment in the US Congress.
The Chinese premier took a studiously neutral view on future purchases of US Treasury bills this year. Some economists say China's financing of US deficits may fail to match last year's levels, just as Washington's requirements balloon as a result of successive bail-outs of financial institutions and a near-$1,000bn fiscal stimulus package.
While China needed reserves for domestic purposes, it was also keen to maintain the value of its existing dollar holdings, Mr Wen said. He played down hopes that Beijing would be ready to use its reserves to lend more to the International Monetary Fund and World Bank to tackle the crisis.
Reform of these institutions was the first priority, Mr Wen said. China has long been pushing for greater influence and voting rights in the IMF and World Bank, which would mean a decline in European influence.
On climate change, Mr Wen said China was taking forceful steps to self-regulate its carbon emissions and increase energy efficiency. But he lowered expectations that China would accept a “quantitative” cap on its emissions at the Copenhagen meeting later this year.
