China's Wen urges global action to calm markets
BEIJING (Reuters) - China's Premier Wen Jiabao urged nations to work together to stabilize turbulent financial markets on Tuesday as global stocks stumbled on fears that the world economy is headed for a downturn.
Speaking after a regular meeting by the Chinese cabinet, Wen alluded to debt problems in the United States and Europe and called on "relevant" countries to implement responsible monetary policies and rein in fiscal deficits.
This is the first time Beijing has publicly commented on the shakeout unfolding in global markets after the United States lost its top-rated credit rating and as Europe's debt crisis worsens.
In a sign that China may soften its policy stance in the face of mounting uncertainties, Wen toned down his inflation rhetoric by omitting Beijing's usual refrain that fighting inflation would be a priority.
Instead, Wen only said Beijing should "try its best to curb price rises" and he noted China's economic policies are showing positive results.
"We urged relevant countries to take responsible monetary and fiscal policies to cut fiscal deficits and properly manage the debt crisis, to ensure a stable performance of global markets and maintain investor confidence," he said.
"The global community should improve the communication and coordination of their macro economic policies to realize sustainable, stable and balanced growth in the world economy," Wen was quoted by state radio as saying.
Qiao Yongyuan, an analyst at the CEBM in Shanghai, said it may be too early to judge whether China is shifting its monetary policy stance, but said uncertainty abroad would likely lead Beijing to stand pat for now.
That is in line with a growing market consensus that China would hold off on raising rates for now, a marked shift from two weeks ago when many thought stubborn price pressures would lead Beijing to raise interest rates once more this year.
"In coming months, Beijing would basically take a wait-and-see approach, and neither relax its policies or further tighten until it gets a much clearer picture on the external economy," Qiao said.
Still, unlike previous months when Beijing has said repeatedly that fighting inflation is a policy priority, Wen did not reiterate that line even though data had showed on Tuesday that inflation quickened to three-year highs of 6.5 percent in July. That is well above Beijing's 2011 inflation target of 4 percent.
"We should try our best to curb price rises and maintain steady and relatively fast economic growth," Wen said. "We should properly handle the balance between managing inflationary pressures, maintaining economic growth and adjusting the economic structure."
Wen's remarks came as world stocks dropped for the 10th day running on Tuesday on fears the global economy could fall into another recession.
Making clear that Beijing is closely watching the market rout, Wen said there is a need to stay calm and guard against dangers. He welcomed the Group of 20 nations' vow on Monday to do all that is needed to keep financial markets stable and the world economy growing.
"We need to calmly watch the situation and make cautious responses to be fully on guard against risks," he said.
As the world's largest foreign buyer of U.S. Treasuries, Beijing wants to see a healthy dollar and U.S. economy to protect the value of its $3.2 trillion foreign exchange reserves, two-thirds of which are estimated to be invested in dollar assets.
China has in the past week urged Washington to get its fiscal house in order through a mix of pleas from top officials and sharp criticisms in state media.
China's Vice-Premier has spoken to U.S. Treasury Secretary Timothy Geithner and exchanged views on the state of global financial markets and the world economy, China's Foreign Ministry said on Tuesday.
But rather than focus its energy on pressuring foreign governments to tackle the turmoil in markets, some analysts said Beijing's efforts are better spent cleaning up its own local debt mess and cutting China's dependence on exports.
"Right now, there is little China can do to address the current global financial market turbulence," said Gao Shanwen, an analyst at the Essence Securities in Beijing.
"With global commodity prices starting to ease and Chinese domestic inflation expected to slow accordingly, it is a good chance for China to solve its own problems, such as cleaning up local government debt."
To pay for infrastructure projects, local Chinese governments have chalked up an estimated 10.7 trillion yuan worth of loans. Some economists believe this is among the top risks threatening the world's No. 2 economy as they estimate that up to a quarter of loans could sour, saddling banks with bed debt.
But Wen sounded confident on China's growth prospects despite his cautious stance on events abroad,
"So far, China's economy continues to maintain the good growth momentum and the macro economic policies are showing positive effect," he said.
(Reporting by Aileen Wang and Koh Gui Qing; Editing by Ed Lane)
- Israel rejects ceasefire plan, source says, as death toll nears 850 |
- Obama tells Central American leaders most children will go home
- First Ebola victim in Sierra Leone capital on the run
- EU edges to economic sanctions on Russia but narrows scope |
- Bad weather seen as probable cause of Air Algerie crash