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Economy Watch
Economy Watch follows the progress of the world economy and offers you our weekly picks. Be sure to visit for the weekly updates.
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2009 December 31 Updates
| China will not appreciate its currency
Wen Jiabao, China’s premier, has said Beijing would not give in to foreign demands for its currency to strengthen, taking an increasingly defiant tone amid mounting international pressure.
Mr Wen said some of the demands for China to let its currency appreciate were an effort to contain the country’s development.
China's premier, has said that Beijing will not give in to demands for its currency to strengthen
“We will not yield to any pressure of any form forcing us to appreciate. As I have told my foreign friends, on one hand, you are asking for the renminbi to appreciate, and on the other hand, you are taking all kinds of protectionist measures,” he said.
By keeping the Chinese renminbi stable against the US dollar, China was contributing to the recovery in the global economy, he said. “The purpose [of these calls for appreciation] is to hold back China’s development,” he added.
China dropped its formal dollar peg in 2005 and has since allowed the renminbi to trade within a narrow band. But since the middle of last year it has operated a de facto peg. This has meant that the renminbi has depreciated about 9 per cent against the currencies of its main trading partners since early this year, even though the Chinese economy has rebounded quicker than any other major economy.
However, Chinese officials argue that its exchange rate against its trading partners is roughly in line with its level at the start of the global financial crisis in September last year, when the US dollar initially strengthened.
In recent weeks the demands for China to appreciate its currency to help rebalance the global economy have come not only the US and the European Union but also developing nations such as Brazil and Russia.
A few economists had predicted that Beijing might begin to shift policy early in the new year on the grounds that it needed to head off incipient inflationary pressures and because any change in policy nearer the June G20 summit might appear to the domestic audience as giving in to foreign pressure.
Mr Wen indicated that the government might accelerate measures to prevent the economy from overheating. The government was worried that property prices in some parts of China had risen too quickly, he said, and that bank lending this year had been too excessive. However, he added that the authorities were already taking measures to moderate the level.
“It would be good if our bank lending was more balanced, better structured and not on such a large scale,” he said.
There were no immediate signs of inflation, he said, but the government had to be watchful because “inflation may emerge”.
Science and technology key to China economic development
Premier Wen Jiabao said that Science and technology will be the key engines to impact the growth pattern in China.
It (science and technology) is key to China's economic development," Wen made the remarks when asked how
China would respond to global scientific innovation expedited by the international financial crisis.
China's economic problem is a structural problem, he said. "Our economy is still unbalanced, uncoordinated and unsustainable,"
Primary focus will be on achieving a balanced development among primary, secondary and tertiary industries as well as among different regions.
Wen said financial crisis in history always brought about technological revolution. "The key to conquer the global economic crisis lies in people's wisdom and the power of science and technology," he said.
In the latter half of the year, China started to foster new growth areas, especially in emerging strategic industries, said Wen.
Wen did not elaborate on "emerging strategic industries" but said that the country should continue to give full play to its advantage in the manufacturing sector, while strive to develop important areas related to environment and people's living.
China will also place special effort on the Internet, green economy, low-carbon economy, environment protection technology and biomedicine.
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