China's Wen Vows Inflation Focus in Chat

FEBRUARY 27, 2010
The Wall Street Journal

China's Wen Vows Inflation Focus in Chat

By J.R. WU

BEIJING—In a broad-ranging chat with netizens in China Saturday,
Chinese Premier Wen Jiabao reaffirmed Beijing's monetary policy stance
and told the U.S. he didn't want this year to become a turbulent one
in key bilateral ties.

Wen's comments come a week before the annual session of the National
People's Congress, China's parliament, where—on March 5—Wen will
deliver the Government Work Report, which will lay out Beijing's
economic blueprint for 2010, including economic growth targets.

His remarks are likely a preview of the tone of the report, which
isn't expected to offer detailed policy measures but should indicate
Beijing is giving itself leeway to gradually exit from its
crisis-driven expansionary policies of the past year as inflationary
risks rise in the world's third-largest economy.

Wen said Saturday that 2010 will be a "complex" year for the domestic
economy, but that he was confident about China's economic development.
He said managing inflationary expectations is a key task this year in
consolidating the recovery of the domestic economy.

"Currently we are still carrying out a moderately loose monetary
policy. That is to say 'moderately loose' is on the one hand ensuring
a stable and relative fast economic development, and on the other hand
being able to manage inflationary expectations," said Wen during the
two-hour online discussion that elicited more than 60,000 questions.

The online chat was done in the same fashion as one year ago, when Wen
took questions from the online public in China for the first time. The
Chinese leader, who is in charge of the country's economic portfolio,
also spoke on subjects ranging from employment and housing needs at
home to the Shanghai expo, healthcare and economic ties with Taiwan.
Wen didn't discuss the yuan exchange rate.

China has nearly 400 million Internet users—the most of any
country—and the live chat was carried on the central government's Web
site.

Wen said China must curb speculative investments in the housing
market, even as the government works to encourage home buying for real
needs. He said the government must prevent the overly rapid rise of
prices in general and part of the work to do that means money supply
must be "appropriate."

Concerns about asset price inflation have been on the rise in China
this year after the lending spree of the past year to stimulate
economic growth. Policymakers in China have been tightening their
oversight on bank lending and the People's Bank of China has already
twice this year ordered banks to keep a larger portion of their
reserves parked with the central bank in an effort to mop up the flush
liquidity.

Wen said he believed the government could control consumer prices
within a reasonable level.

When asked about ties with the U.S., China's second-largest trading
partner behind the European Union, Wen said both powers must work
together to lower trade tensions.

"We hope China-U.S. trade frictions can ease. We also don't hope for
this year to become a 'non-pacific' year in the China-U.S. economic
and trade relationship. This will require both sides to work
together," Wen said.

He said trade frictions between China and the U.S. should be resolved
through equal consultation, and not with trade sanctions, which hurts
both sides.

Wen reiterated China's desire for the U.S. to recognize China's market
economy status and for the U.S. to open up its high-technology exports
to China.

Wen restated that China does not pursue a trade surplus and wishes its
economic and trade ties with the U.S. to be balanced and sustainable.

Write to J.R. Wu at jr.wu@dowjones.com