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China to maintain stimulus to solidify its fledgling recovery
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China's economic recovery is still not stable, and the government will continue its massive stimulus despite recent improvements, Premier Wen Jiabao said yesterday.

Speaking on the opening day of a meeting of the World Economic Forum in Dalian, Liaoning Province, Wen expressed confidence that China will emerge stronger from the global economic crisis. But he said the country is still struggling with the plunge in foreign consumer demand and some industries suffer from unneeded production capacity and backward facilities.

"The stabilization and recovery of the Chinese economy is not yet steady, solid and balanced," Wen said at the "Summer Davos" in the northeast port city. The three-day summit attracted about 1,400 business leaders and policy makers from 86 countries and regions.

"Some of the stimulus measures will see their effect wane, and it will take time before these long-term policies show effect," the premier said. "We cannot and will not change our policy direction in the absence of proper conditions."

China has curbed the downward trend in economic growth, and the country's macroeconomic policy and economic stimulus package proved timely, powerful and effective, Wen said.

"We can now see the light of dawn on the horizon," he said.

China's economy grew 7.1 percent in the first half of this year, investment expanded at a faster pace and consumption maintained steady growth. In the first seven months, 6.66 million new jobs were created in urban areas.

But with uncertainties remaining in the recovery prospects for the world economy, China still face tremendous pressure from the decline in external demand, he said.

"We should focus on restructuring the economy and make greater effort to enhance the role of domestic demand in spurring growth," Wen said.

"To boost domestic demand is a long-term strategic policy for China's economic growth and the way for us to tackle the financial crisis and stave off external risks."

In particular, the country must raise incomes, improve consumer expectations and enhance people's ability and willingness to spend, the premier said.

China will speed up the development of its service sector and make it a key link in its economic restructuring effort, a priority task in boosting domestic demand, Wen said.

Wen defended the stimulus strategy, which some economists say has wasted money by focusing on construction of highways and other public works.

Such spending has helped state-owned industry, but little aid has gone directly to private companies, which account for up to two-thirds of China's economic activity and most of its new jobs, critics have charged.

Wen dismissed these arguments, calling them "a simplistic view." He said only 22.9 percent of the money has gone to construction, while 52.4 percent went to low-cost housing and programs to help the rural poor.

He said the government has extensive plans for overhauling individual industries, encouraging the growth of high-tech and environmental businesses and improving energy conservation.

The premier also called for global efforts on climate change, saying developed countries should take the lead in making reductions of greenhouse gas emissions.

The United States has said it is committed to reaching a deal to reduce greenhouse gases, blamed for global warming, at a United Nations climate summit in Copenhagen, Denmark, in December as long as other major polluters do their part as well.

"Developed countries should recognize their historical responsibility, as well as their high per-capita emissions, substantially cut greenhouse gas emissions and extend financial, technological and capacity-building support to developing countries," Wen said.

(Shanghai Daily September 11, 2009)

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