Slowdown risk causing concern Premier Wen Jiabao said yesterday that he was deeply worried about the US economy and the falling US dollar, reflecting the top leadership's growing concerns over an economic slowdown. The mainland made curbing inflation its priority this year after the consumer price index hit nearly a 12-year high of 8.7 per cent last month. But with the unfolding global economic uncertainties induced by the United States' subprime crisis, leaders have become more alert to offshore risks. 'Recently, the impact of the US subprime crisis has led to devaluation of the US dollar, [there have been] several interest rate cuts and oil prices have stayed consistently high, reaching as much as US$110 per barrel,' Mr Wen said yesterday at his annual post-NPC news conference. 'It has also had a big impact on world stock markets. I am closely watching and feel deeply worried about the global economic situation, especially the US economy.' He said the mainland's tight monetary policy and prudent fiscal policy were aimed at tackling domestic overheating problems, but as the nation had become a part of the global economy, international trends had to be closely monitored and adjusted in a timely manner. 'It's hard to tell the effects of our policies in a short period of one or two months,' Mr Wen said. 'They should be gauged in the medium to long term. What I'm worrying about is when the falling US dollar will hit bottom, what monetary policy the US will adopt and how its economy will turn out.' Economists said it showed that leaders clearly were aware of the slowdown risk, were troubled by the acute policy dilemma, and realised it was just politics to blame the US for the world's economic problems. 'China is in the wagon of the world economy in terms of globalisation,' State Information Centre economist Gao Huiqing said. 'But it is not the helmsman. As 70 per cent of mainland price rises can be attributed to international factors, the nation cannot tackle the problem on its own. 'Also, the sharp slowdown in exports to the US last month rings a bell: the downside risk is real.' Exports to the US rose 14.4 per cent last year but rose only 0.4 per cent year on year to US$15.5 billion last month. Analysts said snowstorms and seasonal factors were mainly to blame, but it might also suggest slowing US demand. Mr Wen said the mainland would weigh the advantages and disadvantages of interest rate or exchange rate changes. 'Up until now, the yuan has appreciated 15 per cent against the US dollar in the past two years, and the pace of appreciation accelerated recently. When we apply monetary tools, we must do comprehensive research and consideration,' he said. Ha Jiming, chief economist at China International Capital Corp, said the mainland was not expected to allow the yuan to appreciate faster because its impact on domestic exporters would result in job cuts. However, moderate appreciation was necessary to help ease inflation. HSBC chief China economist Qu Hongbin said the leadership's realisation of the slowdown problems was a positive development. 'It's one step toward coming up with solutions,' he said. 'However, it is a difficult task to handle.' Outlook, Xinhua's influential weekly journal, carried an article yesterday urging the mainland to prepare for a US recession. 'I expect the mainland will be half-hearted in applying its tight monetary policies and loosen to some extent when the situation demands,' Mr Qu said.