Dollar decline ‘deeply worries’ Wen

By Richard McGregor in Beijin
The Financial Times
Published: March 18 2008 07:52 | Last updated: March 18 2008 08:27

Wen Jiabao, China’s premier, said he is “deeply worried” about the US and global economy and the fallout from the continuing weakness of the greenback against other currencies.

Mr Wen, speaking at the annual news conference at the close of the National People’s Congress, said he was confident about China being able to maintain “fast and steady” growth this year but conceded the country’s economy was not immune from world events.

“Global economic developments cannot but have an impact on China,” he said. “As I have said before, 2008 might be the most difficult year for China’s economy, because there are a lot of uncertainties both inside and outside the country. It makes it more difficult to make decisions.”

Mr Wen said it was “particularly noteworthy” that the renminbi, China’s currency, had been appreciating more rapidly in recent months, but he expressed concern about persistent US dollar weakness.

He said he was concerned about “when the US dollar might reach bottom and what kind of (monetary) policy the US would adopt (in response).”

Mr Wen also acknowledged that China might struggle to reach its inflation goal for 2008 of 4.8 per cent, after January and February recorded monthly inflation rates of 7.1 and 8.7 per cent respectively.

Asked whether he would sacrifice economic output to bring down inflation at the possible risk of increasing the jobless rate, Mr Wen indicated that growth and employment remained the overarching priorities.

“We must ensure that our economy will grow at a proper rate in order to ensure employment,” he said.

“China is a developing country with 1.3bn people. We have to maintain a certain degree of fast economic growth to provide enough jobs.”

He said that China needed to add about 10m jobs a year for the next five years, a lower figure than what officials have used in the past when the rule of thumb was employment growth of 15-20m jobs a year.

Other issues emphasised by Mr Wen included increased agricultural investment to lift food output, the need to conserve energy and protect the environment and to rebuild welfare, health and education systems.

Copyright The Financial Times Limited 2008