All is well with Chinese economy: Wen

BEIJING: China’s Premier Wen Jiabao said the world’s fastest-growing economy is in “good shape”, a sign of his confidence that the nation will avoid a sharp slowdown.

“China's economy is now in good shape, featuring fast growth, gradual structural improvement, rising employment and basic price stability,” Wen said on Monday at the World Economic Forum’s Summer Davos meeting in China’s port city of Tianjin.

The nation’s benchmark stock index rose the most in a week and the yuan advanced to the highest since a peg against the dollar was scrapped in July 2005 as better-than-expected economic data for August eased concerns that the government may overshoot in cooling an economy that grew 11.9% in the first quarter. China’s growth will drive a global economic recovery, Wen said on Monday. “Economic activity indeed was stronger than expected,” said Wang Tao, an economist for UBS, who estimates China will allow the yuan to appreciate a further 2-3% by year-end to ward off pressure from the US and other countries.

Industrial production rose 13.9% in August from a year before, the most in three months, and retail sales and lending figures exceeded economists' estimates, statistics bureau and central bank data released on September 11 in Beijing showed. Imports also accelerated, another sign Chinese growth is picking up after a second-quarter moderation that came as the country took measures to cool the property market.

The data for last month was released as some US lawmakers called for legislation that would sanction China unless it raises the value of the yuan. US companies, including Peoria, Illinois-based Caterpillar, are lobbying against such measures, arguing it could spark a trade war between the world's two biggest economies. The US House Ways and Means Committee is scheduled to discuss China's currency policy this week.

Increased domestic spending as shown by gains in retail sales and imports last month may undermine China’s resistance to faster currency appreciation, said Wang Qing, Hong Kong-based chief China economist at Morgan Stanley Asia, who previously worked for the International Monetary Fund. “Yuan appreciation will not only help China adjust its growth model and contain inflation, but also will help fend off protectionism from abroad,” UBS' Wang said in an interview with Bloomberg Television.

Inflation in China is 1.25 percentage points above the benchmark one-year deposit rate, the latest data showed. So- called negative real interest rates often encourage savers to shift money into assets such as real-estate, sparking the risk of bubbles.

Wen's appraisal on Monday comes after he said on June 30 that China's economy was headed in the right direction. Growth in the second quarter slowed to 10.3% from 11.9% in the first three months of the year after the government increased requirements for mortgages and halted loans for third homes to rein in gains in home prices. — Bloomberg

The government will continue measures to curb property speculation and work to maintain stable home prices, Wen said on Monday. China will also push forward its energy-saving and environmental protection efforts and accelerate reform of income distribution in the nation, he said.

China's economy has grown more than 90-fold since the late leader Deng Xiaoping initiated economic reforms more than 30 years ago, inviting in foreign companies such as Volkswagen AG and American International Group Inc. to help modernise the country. China's gross-domestic product surpassed Japan's in the second quarter and was second only to the United States.

Wen pledged on Monday to create an open and fair business environment for foreign companies in the nation, saying all products manufactured in China will be treated equally in government procurement.