BEIJING, Feb 27, (Agencies): Premier Wen Jiabao on Sunday said China had set a lower than usual economic growth target and pledged to contain soaring prices as concern over runaway growth mounts.
Wen made the comments in a chat with Internet users as authorities braced for possible rallies in major cities after an online appeal aimed at pressing for government openness.
Wen also said the world’s second-largest economy would aim for seven percent annual growth over the next five years — a rare lowering of its usual target of eight percent expansion, until now seen as key to staving off social unrest.
And he again brushed off foreign complaints about the value of the country’s currency, seen by critics in the United States and elsewhere as artificially undervalued, saying any “substantial” appreciation would hurt the economy.
“Rapid price rises have affected the lives of the people and even social stability,” Wen acknowledged.
But he added: “We definitely can contain inflation.”
China announced earlier this month that January inflation remained stubbornly high at 4.9 percent despite a series of measures taken to dampen price rises, including three interest rate hikes in the past four months.
The soaring price of food, housing and other essentials has become Beijing’s main concern, and China’s leaders have watched uneasily as those and other issues helped spark the unrest roiling the Middle East and North Africa.
Wen also said that maintaining social stability was central to the country’s foreign exchange policy, and required a cautious approach to increasing the value of the yuan.
China would adjust exchange rate policy “in a prudent, step-by-step, gradual way, so that our businesses can steadily adapt and overall social stability is maintained,” he said.
The jobs of millions of poor rural migrants were at stake, said Wen, fending off criticism from foreign governments, particularly the United States, that have urged a more rapid rise in the currency that would make Chinese exports more expensive.
Appreciation
“If the yuan saw a one-off large appreciation, that would cause many closures of our processing enterprises and make many export orders shift to other countries and many of our workers will lose jobs,” he said.
China has about 242 million rural residents who work off the farm, and about 153 million of them are migrants who work outside their home towns, including tens of millions in export zones making cheap goods for the rest of the world.
“Let them think about that. If businesses go bankrupt, workers become unemployed and rural migrant workers go home, then what do we have to expand domestic consumption, where will increased consumption come from?”, Wen said of his critics.
Wen, whose term ends in early 2013, highlighted the political risks if the public starts to see inflation as a side-effect of official self-enrichment.
He said the government was determined to stamp out graft and corruption, citing the recent dismissal of Liu Zhijun, the former railways minister who is suspected of corruption.
“I have in fact said before that if price rises become linked to the problems of graft and corruption, that will be enough to spark public discontent, and even create serious social problems,” Wen said.
Wen said the official GDP target was 7 percent per year for the 2011-2015 growth plan. That rate is significantly below the average annual 11.2 percent growth in the last five-year period, but official targets tend to undershoot actual performance.
Chinese annual inflation accelerated lower-than-expected 4.9 percent in January, but price pressures remain strong. Food prices rose 10.3 percent.
To help rein in inflation, China raised interest rates on Feb. 8, the third rate increase since Beijing began a monetary tightening cycle in earnest in October.
Beijing has also imposed a slew of measures to target property prices that have stayed stubbornly high.
“I’m confident that through our efforts, we’ll see results in reining in speculative and investment purchases of housing,” said Wen. The government aims to ensure that 36 million units of affordable housing for poorer workers are built by 2015, he added.