HIGHLIGHTS-China's Premier Wen says will keep yuan stable

BEIJING, March 14 (Reuters) - Chinese Premier Wen Jiabao spoke to reporters at a news conference to mark the end of China's annual parliament meeting.

(For a complete story on the news conference, click on [ID:nTOE62D001])

Following are highlights of the premier's comments:

ON THE YUAN

"First, I think the Chinese yuan is not undervalued...

"Since the outbreak of the global financial crisis, our efforts to keep a stable yuan made an important contribution to global recovery...

"We oppose the practice of mutual recriminations. External pressure is not helpful for yuan exchange rate reform.

"China will stick to implementing a managed market-based and floating exchange rate regime. We will keep the yuan basically stable at an reasonable level."

ON THE WORLD ECONOMY

"The unemployment rates in some major economies have been hovering at a high level, some countries have witnessed the outbreaks of sovereign debt crises, there are still risks in the financial sector and public finance, prices of bulk commodities on international markets and exchange rates of major currencies are not yet stable.

"As a result of inflation expectations, some countries are facing difficulties making the right policy decisions. All these may cause setbacks in the course of mounting a recovery in the global economy and may even lead to a double dip."

ON CHINA'S RECOVERY

"It is true that the Chinese economy has stabilised and is turning for the better, but I should also point out that there has not been a fundamental improvement in the operations of many Chinese businesses that are still reliant on the stimulus to stay afloat.

"We will maintain continuity and stability in our policies. We will continue to pursue an active fiscal policy and appropriately loose monetary policy so as to consolidate the hard won, good momentum in the stabilisation and turnaround in the Chinese economy. Should we encounter setbacks in our efforts to this end, much is at stake, and the cost will be too high.

ON CHINA'S U.S. INVESTMENTS

"Our requirements (in investing reserves) are first: safe; second: liquid; and third, rising in value.

"We are very concerned about the lack of stability in the U.S. dollar. If I said I was worried last year, I must say I am still worried this year.

"We cannot afford any misstep, no matter how slight, in our investments. U.S. debt is guaranteed by the U.S. government, so I hope that the United States will take concrete steps to reassure international investors."

ON U.S.-CHINA TIES

The China-U.S. relationship got off to a good start after Obama took office, however, in the last few weeks and months, it has allowed the Dalai Lama to visit and sold weapons to Taiwan, which violated China's territorial integrity and sovereignty. The responsibility for causing a serious disruption to China-U.S. ties does not lie with the Chinese side but with the U.S.

"With mutual trust, the two countries can both forge ahead, yet with mutual suspicion we will both fall behind. It is always better to have dialogue than confrontation, cooperation than containment, and a partner than a rival. This is the right approach to adopt in pushing forward China-U.S. relations.

ON TRADE

"Overall U.S. exports dropped 17 percent last year, but exports to China were only down 2.2 percent. Therefore, we can see that China is already an export market for neighboring countries like Japan, South Korea, as well as Europe."

"Regarding trade disputes, we maintain that we should stick to consultations.

"I can understand some countries' desire to raise exports, but what I don't understand is depreciating one's own currency and attempting to pressure others to appreciate, for the purpose of increasing exports. In my view that is protectionism.

"The global economic crisis, protectionism hasn't been reduced but has gotten worse, which should alarm all countries.

"We will diligently try to promote basic equilibrium in our international balance of payments.... The most important thing now is to advance the Doha round of trade talks.

"China's total trade is high, but 50 percent is processing trade, and 60 percent of China's exports are made by foreign enterprises or joint ventures. If you restrict trade with China, you are hurting your own countries' firms."

ON MONETARY POLICY

"With regard to monetary policy, it is important for us to maintain appropriate and sufficient money supply, keep interest rates at a reasonable level and manage inflationary expectations."

ON FOREIGN INVESTORS

In a question about the environment for foreign investment, Wen did not directly comment on Google, which has threatened to pull out of China following a hacking attack if it cannot offer an uncensored Chinese-language search engine. He also did not comment directly on Rio Tinto, which has four employees facing trial in Shanghai on charges of accepting bribes.

"China welcomes foreign companies to lawfully enter China... I hope that foreign firms will build more research and development centers in China, and in that way raise the efficiency and quality of foreign capital used here.

"We will institutionalize arrangements to level the playing field for foreign companies operating in China, and to ensure national treatment to foreign companies in China.

"If there are some shortcomings, I still don't have enough contact with foreign companies in China. In the next three years, I hope to increase interaction with foreign firms so that you will understand Chinese policies better and we can get your feedback."

ON AGRICULTURE

"Agriculture is the lifeline of the entire economy, and good agricultural development is essential in whether we will be able to succeed in maintaining fast yet steady economic growth, and managing inflationary expectations this year.

"In this sense, agriculture is a decisive factor."

ON FOREIGN POLICY

"China is firmly committed to peaceful development. Its development will not affect any other country.

"The biggest source of concern for China is whether there will be stability and security in the external environment. In order to promote development at home, it's vital to have a stable and peaceful international environment."

ON TRADE AGREEMENT WITH TAIWAN

"The agreement should be negotiated with three principles in mind -- equal consultations, mutual benefit and win-win progress, and accommodation of each others' concerns.

"Negotiations are complex, but differences between brothers cannot sever blood ties. Problems can always be solved."

ON DOMESTIC STABILITY

"I have said that if there is inflation, plus unfair income distribution and corruption, that could be strong enough to affect social stability."