BEIJING, March 14 (Reuters) - Premier Wen Jiabao said on Wednesday that China would intensify reform of its currency regime and allow the yuan to float more freely, while expressing regret for what he said was unfinished work in his nine-year term.
Wen was speaking at the end of an annual parliament session, the National People’s Congress, which has been punctuated by signs of a slowing economy.
The session was overshadowed by speculation about Bo Xilai, the ambitious head of Chongqing. Bo’s hopes for a central leadership post took a blow after his subordinate, Wang Lijun, took refuge in the U.S. consulate and left after more than a day inside, led away by officials who put Wang under investigation.
Wen’s key comments follow below:
ON THE WANG LIJUN INCIDENT:
“I can tell everyone that the central government has attached great importance (to the Wang Lijun incident), and immediately instructed the relevant departments to carry out a special investigation. Currently, the investigation has made progress, we will handle this issue in strict accordance with the law on the basis of facts and using the law as a criterion.
“We will give the people an answer to the results of the investigation and the handling (of the case), so that it can withstand the test of law and history.
“Over the years, the successive governments of Chongqing and the people in Chongqing have made tremendous efforts to promote reform and development. And they have achieved remarkable progress in that regard. The present Chongqing municipal Party committee and the municipal government must reflect seriously and learn from the Wang Lijun incident.”
“I want to say a few words at this point, since the founding of the People’s Republic China, under the leadership of the Party and the government, our country’s modernisation drive has made great achievements. Yet at the same time, we’ve also taken detours and have learnt hard lessons. Since the Third Plenum of of the 11th CPC Central Committee, in particular since the central authorities took the decision on the correct handling of relevant historical issues, we have established the line of thinking and that we should free our minds and seek truth from facts and we have formulated the basic guidelines of our Party. In particular, we’ve taken the major decision of conducting reform and opening up in China, a decision that’s crucial for China’s future and destiny.
“What has happened shows that any practice that we take must be based on the experience and lessons we’ve gained from history and it must serve the people’s interests. The practice that we take must be able to stand the test of history and I believe the people fully recognise this point and I have full confidence in our future.”
ON GOVERNMENT DEBT:
“The debt-to-GDP and budget deficit-to-GPD ratio for China is at a fairly low level. They are both lower than many developed countries and in emerging market economies.
“Second, government debt in China is at a controllable and safe level. In 2010, we audited local government debts. The level was at 10.7 trillion yuan ($1.7 trillion), and by the end of 2011 this figure only increased by 300 million yuan.
“Third, in the handling of local government debt, we will properly handle it and put a cap on its increase. We will properly handle outstanding local government debt in a step-by-step manner by classifying it into different categories and managing it accordingly.
“For any increase in local government debt, the revenues and expenditure must be incorporated into local government’s budgets and final accounts.
“Fourth, the majority of local government debt is actually in the form of high-quality assets with stable cash flows and promising returns. The debt of some projects can be repaid by the returns on those projects.
“At the same time, we will also let the market play a role in handling local government debt, through such ways as asset disposal, the transfer of projects and the selling of equity.
“In a word, we will take the matter of local government debt very seriously and we will not allow it to adversely affect China’s development.”
ON INCOME INEQUALITY
“We will further regulate the incomes of high-income groups, in particular the pay and bonuses of senior management at state-owned companies and state-owned financial institutions.”
ON TIBETAN SELF-IMMOLATIONS:
“We do not agree with such extreme actions to interfere and hurt social harmony. The young Tibetans are innocent and we feel deeply pained by such behaviour.”
“It should be clear that Tibet and the Tibetan areas of Sichuan are integral parts of Chinese territory. The so-called Tibetan government-in-exile in India’s Dharamsala, regardless of whether (it) is under the direct and indirect control of the Dalai Lama, is a theocracy. Its purpose is to separate Tibet and other Tibetan areas from the motherland. On this issue, our position and principles are firm.”
“China has no personal interests on the issue of Syria and China does not seek to protect any party, including the government of Syria. We make our own judgements and determine our own position on this issue on the basis of actual facts.
“The position of the Chinese government on Syria is four-fold. First, the lives of civilians must be protected. The killing of civilians must be immediately stopped by all relevant parties in Syria.
“Second, China respects the legitimate aspirations of the Syrian people for change.
“Third, China supports the special envoy jointly supported by the Arab League and United Nations in his mediation efforts.
“Fourth, China has deep sympathy for the humanitarian plight of the Syrian people and we have participated in relevant international humanitarian aid and we will continue to do so.
“At the same time China has, in its own way, worked intensively on the relevant parties to push for a political dialogue process. We believe that the demand for democracy by the Arab people must be respected and truly responded to. I believe this trend towards democracy cannot be held back by any force.
“There have been exchanges for the last 1,000 years between China and the Arab people. It has been China’s consistent position to respect Islamic civilisation and support the just causes of Arab countries.
“As the Arab world undergoes changes, I believe that the position of the Chinese side will win the understanding and trust of Arab countries and eventually relations and exchanges between China and Arab countries will strengthen.”
ON SOCIAL INJUSTICE:
“Of course, I know that social inequities and legal injustice have caused the dissatisfaction of the masses. We must continue to push forward the work on promoting social equity. In my final year, our government will have to do several difficult things.”
“The first thing is to develop the overall development of the reform of the income distribution system. The second thing is to develop and introduce the collective farmland requisition regulations, so that farmers can truly protect the property of their contracted land.”
ON ECONOMIC GROWTH:
“We hope that the Chinese economy will achieve high quality growth and that our economic development will serve the primary goals of making structural adjustments to the Chinese economy and the shift of our growth model. We hope that China’s economic growth will no longer come at the cost of resources consumption and environmental pollution; rather we will be able to put China’s economic growth on a path that is conducive to energy conservation and the protection of the environment.
“The economic slowdown in China is mainly the result of our proactive macro controls. One should recognise that China’s economy is under downward pressure due to the contraction of the external market caused by the European debt crisis. Under such circumstances we have taken the decision to adjust downward China’s GDP growth target, mainly because we want to continue to press ahead with our structural economic adjustment.
“If we in China can truly overcome the problem of a lack of adequate balance, coordination and sustainability in our economic growth, and get Chinese economic growth on the path of quality development, this will, in a fundamental way, be good news for the global economy. We must continue to strike a balance between maintaining steady and robust economic development, making economic structural adjustments and managing inflationary expectations.”
ON VILLAGE ELECTIONS AND DEMOCRACY:
“I have, on more than one occasion, proposed that (we) must unswervingly implement autonomy for villagers and protect the legitimate rights of villagers to hold direct elections. We should follow this path by encouraging the people to be bold in practice.”
“I believe China’s democratic system will, in accordance with China’s national conditions, develop in a step-by-step way. No force can stop this.”
ON HONG KONG:
“Hong Kong faces now both difficulties and opportunities. The global financial crisis and the European debt crisis are still exerting an adverse impact on Hong Kong and the pressure is still there. Moreover, Hong Kong is under the dual pressure of slowing economic growth and inflation.”
ON THE PROPERTY MARKET:
“Now, I can clearly tell everyone, home prices are still far from returning to reasonable levels, and as such, regulation cannot be relaxed. If they are relaxed, our achievements will have come to naught, (it) will cause chaos in the real estate market and will not be conducive to the long-term health and stability of the housing market.”
ON POLITICAL REFORM:
“Although our party has made resolutions on a number of historical issues, after the implementation of reform and opening up, the mistakes of the Cultural Revolution and feudalism have not been completely eliminated.”
“As the economy developed, it has caused unfair distribution, the loss of credibility, corruption and other issues. I know that to solve these problems, it’s necessary to not only enter into economic reform but also political reform, especially reform of the Party and the state’s leadership system.”
“Reform has reached a critical stage. Without the success of political reform, economic reforms cannot be carried out. The results that we have achieved may be lost. A historical tragedy like the Cultural Revolution may occur again. Each party member and cadre should feel a sense of urgency.”
“Financial cooperation between both sides of the Strait will continue to develop, including the pushing of cooperation on banking settlement system and encouraging banks on both sides to take stakes in each other, to support the role of finance in trade and economic cooperation.”
ON CURRENCY REFORM:
“Since the exchange rate reform in 2005, China’s real effective exchange rate has risen by 30 percent.”
“In the Hong Kong market, NDFs (non-deliverable forwards) have started to fluctuate both ways. This tells us the yuan is possibly near a balanced level.”
“We will step-up exchange rate reforms, especially in increasing two-way fluctuations.”
“We will adhere to the principles of the Doha Round and advocate for free trade and oppose protectionism.”
ON HIS LAST TERM AS PREMIER:
“I’ve served as premier for the past nine years. These years have not been easy or ordinary. But I’ve always felt that there’s a lot of work that has not been done, (I) have more than a few regrets.
“Due to limited capabilities, coupled with the system and other reasons, there are many deficiencies in my work.
“Although it is not irresponsibility that has caused mistakes in any one matter, as the person in charge of the country’s highest administrative organ, as for the problems that have arisen in the economy and society during my term, I bear responsibility.”
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