Wen warns of challenges as China welcomes new year

A lion dance troupe performs during a temple fair to celebrate upcoming Chinese New Year in Beijing February 12, 2010. The Chinese New Year begins on February 14th and according to the Lunar calendar will be the Year of the Tiger.

BEIJING (Reuters) - Chinese Premier Wen Jiabao warned his people to keep a "sober mind" about the challenges ahead in the new year as the country welcomed the arrival of the Year of the Tiger with noisy celebrations on Saturday.

"In 2010, China will face a more complicated situation, both at home and abroad," the state news agency Xinhua paraphrased Wen as saying, in remarks carried in major newspapers.

People must "keep a sober mind and an enhanced sense of anxiety about lagging behind," the premier added.

Priority should be given to "persistence in taking economic development as the central task, forcefully promoting reform and opening up ... and doing a better job responding to the global financial crisis, in order to keep steady and relatively fast economic development."

The government is trying to maintain a balance between the economic growth needed to create jobs for the country's 1.3 billion people, and not letting the economy overheat and drive up the cost of basic goods and housing for residents.

China raised the level of reserves banks must hold for the second time this year on Friday, spooking financial markets on the eve of its New Year holiday by showing it was intent to curb lending and inflation.

China powered to 8.7 percent growth last year, by far the strongest of any major economy, driving demand for everything from Chilean copper to Australian iron ore.

"Shanghai house prices must fall, they cannot go higher, this year they must fall," said Shanghai resident Ge Jieyou, 53. "We have a lot of corruption here, I don't think that will change this year."

Wen, who in previous years has spent the holiday with everyone from AIDS patients to survivors of 2008's devastating Sichuan earthquake, this year visited a drought-struck part of the southern region of Guangxi, state television said.

HU MEETS TAIWAN INVESTORS

President Hu Jintao, by contrast, first visited Taiwan investors in the coastal city of Zhangzhou in the southeastern province of Fujian, before going to an old revolutionary base further inland.

Taiwan businesses have invested billions of dollars in China since detente began between the two sides in the 1980s, lured by a common culture and language.

China and Taiwan have been ruled separately since a civil war ended with Communist victory in 1949.

Ties have improved further following the election of China-friendly Taiwan President Ma Ying-jeou in 2008, who has signed a series of landmark trade and tourism deals with Beijing.

"We will try our best in everything that will benefit the Taiwan compatriots, and we will honor our words," Hu told the Taiwan investors, according to Xinhua.

Beijing has directed its ire over Washington's recent decision to sell weapons to Taiwan at the United States, rather than the self-ruled and democratic island, being keen not to damage warming relations and the eventual goal of reunification.

Taiwan and China are gearing up to sign a free trade deal, something Hu told his Taiwan audience would "bring win-win results."

The year of the tiger is believed to bring with it mythical heroic powers, even if soothsayers say it is an inauspicious one for marriage. Still, the year is seen as being good for the economy.

Beijing and the commercial capital Shanghai reverberated with huge, ad hoc firework displays and the sound of firecrackers, whose smoke filled the streets.

Firecrackers are believed to scare off evil spirits and entice the god of wealth to people's doorsteps once New Year's Day arrives.

Celebrations will carry on into the early hours of Sunday, officially the first day of the Lunar New Year.

(Additional reporting by Lucy Hornby, and Farah Master in Shanghai)