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Chinese economy shows signs of positive changes

CHINESE Premier Wen Jiabao, in an interview with Hong Kong and Macau reporters yesterday, said that the Chinese economy showed signs of better than expected positive changes in the first quarter as a result of the economic stimulus package adopted by China.

Firstly, the domestic demand rose on a sustainable basis. Meanwhile, investment in fixed assets increased rapidly and consumer demand grew steadily and relatively rapidly. Although lower from the same period of last year, imports and exports grew on a month-on-month basis in the three-month period, Wen said.

This indicates that some sectors and enterprises in China are in a process of gradual recovery.

Secondly, industries above the designated size registered month-on-month growth, with a year-on-year increase of 3.8 percent in both January and February, and a year-on-year increase of 8.3 percent in March.

Thirdly, the purchase management index and the entrepreneur confidence index of the manufacturing industry both rose, indicating that the Chinese economy has begun to stabilize and recover in some fields, according to Wen.

And fourthly, the market confidence went up and the economy became more active over the first three months, with increases in both the stock market and housing market transaction volumes.

The positive performances in economic fields suggest that the policies adopted by the central government of China have been timely and correct, and have led to successes, the premier noted.

The premier was here to attend the Association of Southeast Asian Nations (ASEAN) related summits. The Chinese premier went back home late yesterday ahead of schedule, after the Thai government postponed the summits because of domestic political unrest.

The premier said we should see that China's economy is still facing very serious hardships, which can be attributed to the shrink of external demand and a relatively sharp fall in exports. This has negatively impacted export enterprises, export-oriented industries and export-oriented zones, and has resulted in decreases in business profit making, declines in financial revenues and heavier pressure on employment, he said.

As the international financial crisis is deepening and spreading, we should never lose vigilance, Wen warned.

As the crisis has not touched its bottom, we can hardly say that the Chinese economy alone has got out of the crisis. China cannot save the world, nor can it survive without the world, Wen said. What we should do is to exert our utmost efforts to minimize the effect of the crisis, he said.

When answering questions whether China will introduce additional economic stimulus plans, Wen said the government should now step up efforts to carry out the policies and measures of the existing stimulus package. The earlier they are put into effect, the more beneficial and active they will be, he said.

Firstly, it is imperative to release the additional investment for stimulating the economy that has been included into the budget.

Secondly, specific rules for reforming and reviving a total of ten key industries should be formulated as early as possible.

And thirdly, efforts should be made to speed up the development of the social security system, Wen said, adding that the national medical and health-care system reform launched in recent days, which has drawn international attention, should be implemented as early as possible.

At the same time, it is essential to closely follow up the changing economic situation at home and abroad, and hammer out new response plans whenever necessary, said Wen.

Priority should be given to strengthening social security, improving the people's livelihood and strengthening protection of the ecological environment, he said.

In response to questions about the trial of cross-border trade deals in the Chinese yuan, Wen said the central government has decided to test the program in the city of Shanghai, as well as four cities in south China's Guangdong province -- Guangzhou, Shenzhen, Dongguan and Zhuhai.

Hong Kong and Macau will be included in the pilot program, and ASEAN members will become the first group of foreign countries to benefit from the scheme, Wen said, adding the regulatory documents governing the pilot program will be issued in a short time, Wen said.

The program will promote Hong Kong's trade development, and will help its enterprises, including those in the Pearl River Delta region and other areas in the Chinese mainland, to stave off the risks from exchange rate fluctuations, he said.

This will invigorate Hong Kong's financial industry and underpin its position as an international financial hub, he added.

Wen said that compared with developed countries, China, as a developing country, has undergone only a short period of time in its financial reform and development, lacking both experience and talented people, and there is also room for improvement in its financial system.

At present, China allows the yuan to become convertible under the current account and it will take a long time to realize full capital account convertibility for the Chinese yuan, he said.

Answering a reporter's question on whether building Shanghai into an international financial hub will rival Hong Kong's financial status, Wen said the Chinese central government has always paid close attention to the development of Hong Kong's financial sector.

"I noticed that most of the media in Hong Kong showed support for the decision to build Shanghai into an international financial center, but lingering worries still remain," he said.

Actually, the status of an international financial center is established not by a government decision but through market competition, he said.

"I have said years ago that Hong Kong's status as an international financial center is irreplaceable due to its unique geographical advantage, a long history of financial management, extensive channels of financial operation, a full-fledged legal system and a rich pool of financial expertise," Wen said.

However, Hong Kong's status as an international financial hub also meets challenges, he said.

He added that what is imperative for the time being is to enhance regulation, maintain the stable, healthy and sustainable development of its financial sector, and to make due support for its economy.

While developing the financial sector, Hong Kong should also spare no effort to tap the potential of its economic growth such as logistics, tourism, the health sector, science and technology, education, and high-tech industries, so as to lay a foundation forthe sustained economic development, he said.

Responding to a question about the recent police investigation into Hong Kong-listed conglomerate CITIC Pacific, Wen said the issue should be addressed in accordance with the laws and financial supervision regulations of the Hong Kong Special Administrative Region, and no interference from the mainland or other parties will be allowed.

Earlier this month, Hong Kong police searched the headquarters of the company, which reported huge losses from unauthorized hedging against changes in the exchange rates of Australian dollar last year.

After all the facts are clarified, serious lessons should be drawn from this incident, including the company's management and its supervision, Wen said.

On Macau's economic growth, Premier Wen said it has a unique economy powered mainly by its gambling industry.

As the region continues to develop its gambling industry, efforts should be made to promote the region's economic diversity based on its own reality, he said.

Macau's development is somewhat restrained due to its tiny area, but the central government is currently working on a long-term development plan of the Pearl River Delta to strengthen economic ties between Guangdong Province and Macau in an effort to promote Macau's development, said the premier.

Because of Thailand's domestic situation, the Thai government yesterday postponed the ASEAN related summits scheduled for April 11 and April 12.

Wen said his visit to Thailand was designed to enhance the friendly cooperative relations between China and ASEAN and to make joint efforts with its members to tackle the global financial crisis.

The Chinese premier said he had been aware of the situation in Thailand before his departure for the country, and his insistence on attending the summits indicated China's sincerity in this matter.


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