Wen Jiabao

Wen says prices falling but warns of pressures

PUBLISHED : Wednesday, 09 November, 2011, 12:00am
UPDATED : Wednesday, 09 November, 2011, 12:00am


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Domestic prices had been falling significantly since October but seasonal demand over the winter could still cause inflationary pressure, Premier Wen Jiabao said in Russia.

His speech was publicised as the National Bureau of Statistics prepares to announce economic data for October today. Analysts expect inflation to have eased from September, when the consumer price index was up 6.1 per cent year on year.

Wen made his comments to Chinese people living in Russia on Sunday, where he was meeting prime ministers of the six-nation Shanghai Co-operation Organisation (SCO), Xinhua reported yesterday.

The premier said the prices of goods such as fruit, beef, mutton and milk were still high, but China was confident of, and capable of, managing the domestic economy well.

Wen expressed concerns about the global economy, saying the financial crisis, in its fourth year, was unprecedentedly long and complicated. 'We are neither blindly optimistic, nor pessimistic,' Wen said. '[We will] solve the problems step by step.

The state of the global economy was a main focus of the SCO leaders' meeting. Wen used the gathering to propose expanding currency swaps with Russia and four Central Asian nations to serve as a buffer against global volatility.

The SCO issued a communique at the end of its two-day meeting in St Petersburg saying emerging economies would play a crucial role in stabilising the world economy.

Wen suggested increasing the use of currency swaps and co-operating more on yuan-trade settlement with member countries, according to Xinhua. Russian Prime Minister Vladimir Putin, chairing an open session of the SCO, supported Wen's proposal, Reuters reported.

Professor Xiao Xian, dean of Yunnan University's school of international relations, said Wen's remarks and the communique suggested that there was a growing will among SCO members to expand their co-operation from politics and security to trade and finance.

Xiao said the organisation was originally designed to meet regional security challenges following the September 11 terrorist attacks in the US but there was now a desire among members about expanding co-operation to the economic sphere.

The SCO, founded in Shanghai in 2001, groups China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan. India, Iran, Mongolia and Pakistan are SCO observers, while Sri Lanka and Belarus are its dialogue partners.

Wen suggested SCO members build a multi-level and multi-channel system of financial co-operation to provide support for regional economic co-operation projects.

The SCO should not only be able to weather economic tests but also seize the opportunity for growth, Wen said.

Tao Wang, chief China economist with UBS Securities, said the expansion of currency swaps and yuan-trade settlement would boost the renminbi's status outside China.

'It is part of the ongoing progress of the yuan's internationalisation, and there is great potential in regard to trade and investment,' he said.