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August 25, 2009

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Wen warns of irrational exuberance on rebound

PREMIER Wen Jiabao has warned of uncertainties ahead despite signs of economic recovery both at home and abroad, reiterating the government's steadfast commitment to its current economic policies.

Wen's remarks came after US Federal Reserve Chairman Ben Bernanke declared last Friday that the US economy had started to recover, which boosted investor confidence around the world and pushed up equities and crude oil prices.

"There are still a lot of uncertain factors ahead, and the economic situation is still very grave, although both the world economy and the national economy are making positive changes," Wen said during a three-day inspection tour of east China's Zhejiang Province that ended yesterday.

Wen said the country's economic performance showed increasingly positive signs but stressed recovery was still "unstable" and "unbalanced" and warned against blind optimism.

Wen said great uncertainties persisted, and export demand was still down and could remain that way for a long time.

"The country's economic development still lacks inner vitality to counter the crisis, as policy support remains an important propellant of economic growth," he said.

Weakening external demand was also creating overcapacity in some sectors, which could be a big obstacle to a rebound in industrial and economic growth, the premier said.

"It is also difficult to significantly expand domestic demand in a short period," he said. "Some short-term policies could be less effective over time while it takes some time before medium- and long-term policies can take effect.

"Therefore, it remains our top priority to maintain the macroeconomic policies for stable and relatively fast growth. We cannot afford any slackening or hesitation in doing so."

Wen said the government had been able to reverse the decline in growth quickly with timely and decisive stimulus measures, and the national economy was rebounding, especially since the second quarter, with market expectations improved and investor confidence raised.

"These are hard-earned results," Wen said.

China's economy reported a growth of 7.9 percent in the second quarter.


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