Premier assures markets over foreign reserves
Cary Huang in Beijing
China's plan to diversify the investment of its more than US$1 trillion in foreign exchange reserves would not affect US dollar-denominated assets, Premier Wen Jiabao assured world investors yesterday.
In a news conference at the end of the annual session of the National People's Congress, Mr Wen also warned that the mainland's economy faced serious problems that would take time to resolve.
He admitted that corruption remained widespread and blamed this on an over-concentration of power in the hands of government officials. More needed to be done to address issues such as social justice but he repeated that China needed to find its own way to democracy.
Mr Wen also said Hong Kong had an irreplacable economic role within China.
The premier did not outline any new reform initiatives at his news conference. However, the NPC yesterday passed the controversial Property Law, which offers equal protection to state and private property, and the Corporate Income Tax Law, which unifies the corporate tax rate at 25 per cent.
Confirming a plan to establish a new agency to handle the investment of the mainland's ballooning reserves, Mr Wen said it would not adversely affect the market.
'I can assure you that by instituting such a foreign exchange company, it will not have an impact on US dollar-denominated assets.'
The creation of the agency - to be headed by former vice-minister of finance Lou Jiwei - has raised concerns among international investors, who fear the mainland might sell down its large holding of US Treasury bonds.
On the domestic economy, Mr Wen said the mainland still faced many structural problems.
'Investment growth is too high, credit lending is too fast, liquidity is excessive and trade and international payments are not balanced. All these problems facing us need to be urgently addressed and it takes time to solve them,' he said.
He avoided commenting on whether a bubble was developing in the mainland's stock markets, where a recent one-day plunge of almost 9 per cent rattled international markets.
Shortly before Mr Wen spoke, the National Bureau of Statistics announced that fixed-asset investment in urban areas rose 23.4 per cent year on year in the first two months of the year.
Fixed-asset investment - a major economic driver - increased 24 per cent last year. Yesterday's growth data followed similarly robust figures for the nation's trade surplus, money supply and credit growth and industrial production.
Mr Wen also spoke about the urgent need to address the plight of the underprivileged, saying they deserved greater attention from the government. 'The speed of a fleet is not determined by the fastest vessel, rather it is determined by the slowest one,' he said, quoting American philosopher John Rawls.