Global crisis not over, China reforms to go on: Wen

HANOVER, Germany Sun Apr 22, 2012 4:14pm EDT

Chinese Premier Wen Jiabao delivers his speech during the opening ceremony of the Hanover fair in Hanover, April 22, 2012. China is this year's partner country of the industrial fair. The Hanover fair open its doors to the public on April 23 and will run to April 27, 2012. REUTERS/Ina Fassbender

Chinese Premier Wen Jiabao delivers his speech during the opening ceremony of the Hanover fair in Hanover, April 22, 2012. China is this year's partner country of the industrial fair. The Hanover fair open its doors to the public on April 23 and will run to April 27, 2012.

Credit: Reuters/Ina Fassbender

HANOVER, Germany (Reuters) - The global financial crisis is not over and technical innovation and investment will be key to sustaining what remains a "tortuous" recovery, Chinese Premier Wen Jiabao said on Sunday during a visit to Germany.

Wen also said China, the world's biggest exporter and second largest economy, would press on with reforms aimed at creating better legal protection for foreign investors -- a major concern for the growing number of German firms active in the country.

"Currently, the international financial crisis is not over and the global economic recovery is difficult and tortuous," Wen said at the Hanover trade fair that was also attended by German Chancellor Angela Merkel.

More investment in the real economy and technical innovation will be the most powerful drivers of global recovery, he said.

China's annual economic growth slowed to 8.1 percent in the first quarter of 2012 from 8.9 percent in the previous three months - the fifth consecutive quarter of slowdown.

"The reason why the global economy cannot walk out of the shadow of the (financial) crisis is also related to the lack of new growth points in the real economy," Wen said, adding that China and Germany had fared better than most during the crisis due to their strong manufacturing bases.

"(The two countries) will surely have an ever more important role to play in innovation and development of worldwide industry," he said.

Merkel, whose country has faced criticism over its insistence on reducing debts even during a time of poor growth in much of the developed world, said Germany wanted to strike a good balance between fiscal discipline and fostering growth.

"We must succeed with both because responsibility rests with Germany too for a sensible global economic development," she said.

Merkel praised China's huge stimulus package launched during the financial crisis, saying it contributed to Germany's own export-led recovery.

Germany has also welcomed China's pledge last week to contribute towards new funding for the International Monetary Fund that is meant to protect the global economy from the euro zone debt crisis.

The economies of China and Germany - the world's second biggest exporter - are increasingly intertwined, with bilateral trade jumping to 130 billion euros in 2010 from 94 billion in 2009.

OPENING UP

Germany produces the machines and equipment that Chinese companies need to manufacture their goods, many of which in turn end up back in Germany.

China is also a giant market for high quality products made in Germany such as cars and electrical goods. The main Chinese exports to Germany are electrical goods, toys, and textiles.

On Monday, Wen was expected to sign a deal with German carmaker Volkswagen (VOWG_p.DE) for the building of a new factory in Xinjiang province in western China.

"China's national policy of opening up (its economy) to the outside world will not change," Wen said in Hanover, adding that Chinese firms were also looking to increase their own investments overseas, including in Germany.

Wen repeated Beijing's pledge to improve its legal framework and protection of intellectual property and give equal treatment to foreign companies in government procurement.

China will create a "fairer and more stable transparent and predictable environment" for foreign investors, said Wen, whose tour of northern Europe began in Iceland.

Many Chinese academics are beating the drum for deepening economic reforms and steps to tame state conglomerates, which strengthened their domination of key sectors after Beijing's 4 trillion yuan ($632.64 billion) stimulus package launched in 2008.

Free market reforms, launched by former leader Deng Xiaoping in 1978 and underpinned by China's entry into the World Trade Organization in 2001, are starting to lose steam, they say.

About 500 Chinese exhibitors are taking part in this year's Hanover trade fair, in which China has the status of "partner" country and which is expected to draw around 200,000 visitors in coming days.

(Writing by Gareth Jones; Editing by Michael Roddy)

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