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December 28, 2009

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Wen: Stimulus policy will continue

CHINESE Premier Wen Jiabao yesterday said China would continue its stimulus policy because withdrawing government support too early would ruin the country's achievements in fighting the economic slowdown.

Wen said the country would maintain its pro-active fiscal policy and its moderately loose monetary policy to buoy the economy in 2010.

"China's economy has been on track for recovery. However, the economic performance and operations of enterprises still mainly rely on support from government policies," he said.

In November last year, China shifted the fiscal and monetary policies to expand domestic investment and demand.

"To withdraw macro-economic policies too early will likely ruin the efforts made before and reverse the economic development," Wen said.

China will gear more investment to social welfare, technical innovation and energy conservation and emission cuts next year, he said.

Wen said the Chinese people should be proud of their country's economic performance and said economic stimulus measures had proven effective, but he readily admitted the economy had problems.

In an exclusive interview with Xinhua, Wen acknowledged the economy could have been better "if our bank lending had been more balanced, better structured and not on such a large scale."

"The past year has been a breathtaking period," he said.

Sluggish overseas demand had led to a wave of factory closures and layoffs in coastal manufacturing regions. More than 20 million migrant workers returned home.

"Our mood was very heavy. We didn't know how much this disaster (the financial crisis) could hurt the Chinese economy or how long it would last," said Wen.

Under such circumstances, the government adopted decisive policies and measures, he said, referring to the economic stimulus measures, featuring the 4 trillion yuan (US$586 billion) investment plan, adopted November 5 last year.

Although China's economy began to recover, Wen said it is too early to grade economic performance because the financial crisis is not over yet.

Citing credit growth as an example, Wen admitted China might need to "pay some price and run into some unexpected difficulties" in tackling the global financial crisis.

The moderately loose monetary policy, which the government adopted in November last year, spurred a surge in new lending.

In the first 11 months, new loans hit 9.21 trillion yuan, an increase of 5.06 trillion yuan year on year. That far exceeded the full year target of 5 trillion yuan set in March.

Wen said the State Council, or the Cabinet, had noticed the problem in the middle of the year and moved to correct it.

"It has been improving in the second half," he said.

Wen also said he had noted the criticism of soaring property prices and pledged to crack down on illegal activities that inflated prices.

"As the property market is recovering rapidly this year, housing prices in some cities are rising too fast, which deserves 'great attention' of the central government," he said.

Statistics from Goldman Sachs showed that over the past six years, the housing price hikes had outpaced income rises by 30 percentage points in Shanghai and 80 percentage points in Beijing.


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