Wen Jiabao

Economic controls not toothless: Wen

PUBLISHED : Wednesday, 07 November, 2007, 12:00am
UPDATED : Wednesday, 07 November, 2007, 12:00am

Premier in rare defence of record

Premier Wen Jiabao has mounted a rare public defence of his macroeconomic policies, which have been criticised both within the Communist Party and overseas.

In an uncharacteristically assertive manner, Mr Wen arranged an interview with a group of Hong Kong reporters yesterday during his visit to Russia. The premier said the criticism directed at his economic policies was ill-founded - the strong and stable growth vindicated those policies.

'Everybody agrees that China's economy has been doing pretty well for the past five years and actually it's one bright spot [in the global economy],' said Mr Wen, who has been in charge of the economy since 2003. 'If that's the case, then to label [our] macroeconomic controls as 'toothless' contradicts both fact and logic.'

Mr Wen's management of the world's fourth-largest economy has been a subject of heated debate. Overseas media and analysts have said his macroeconomic controls have been ineffective in cooling the sizzling economy and run the risk of damaging the mainland's long-term growth. There has even been speculation that Mr Wen has come under pressure to quit as premier at next year's annual meeting of the National People's Congress.

The 65-year-old premier, who retained his Politburo Standing Committee membership after the party's 17th National Congress last month, responded publicly to that speculation for the first time yesterday.

'I still have that pure and sincere heart,' said Mr Wen, who has built a reputation as the 'people's premier' through his populist approach. 'I shall continue to fight on.'

Mr Wen, whose cabinet faces a massive reshuffle at the NPC meeting in March, with a new crop of vice-premiers and ministers replacing retiring ones, hinted that there would be no major economic policy changes in his next five years in office.

'The current administration will endeavour to carry out its duties and the new cabinet will continue to maintain the continuity of the economic policies,' he said.

Macroeconomic controls, a stable growth rate and issues 'related to people's lives' - meaning health care, education and housing - were listed by Mr Wen as top work priorities for the next five years.

The mainland's double-digit economic growth since 2003 has raised concerns about an overheating economy. Despite a raft of tightening measures and many official warnings issued from the State Council, nearly every major macroeconomic barometer seems to signal the policies have failed to solve the problems.

Housing prices in mainland cities are still skyrocketing, fixed-asset investment shows no sign of abating and the stock market continues to set a new high almost daily. Inflation is also at its highest level in 11 years due to an increase in food prices.

Although the government has repeatedly vowed to tackle imbalances in its trade and international payments, the trade and current account surpluses have now ballooned to more than 10 per cent of gross domestic product, leading to talk of a US-China trade war.

The mild-mannered premier is widely perceived as lacking the toughness to push through painful economic reforms, unlike his more fiery predecessor Zhu Rongji .

In August, Citigroup chief Asia economist Huang Yiping issued a scathing report highlighting the gap between rhetoric and reality on trade and growth imbalances, the stock market, energy and pollution.

'Since the beginning of economic reform, China has been known for its decisiveness in economic policy making,' he wrote. 'Unfortunately, recent experiences appear to suggest that such decisiveness might be gone, at least in areas of macroeconomic policy.'

He said the country's macroeconomic problems would 'continue to develop until either the authorities take more decisive policy actions or something blows up'.