BEIJING (Reuters) - China Premier Wen Jiabao signalled on Thursday that controlling inflation will remain a top priority in coming months even as the world economy wobbles.
Although imported inflation is expected to remain elevated, Wen said the global economy is still fragile and that sovereign debt problems in the United States and Europe are set to put a “drag” on world economic growth in the future.
Wen made the comments in an article published in Qiushi, or Seeking Truth, a key journal published by the ruling Communist Party. The summary of his article was published on Wednesday.
Noting that an economic slowdown in China is expected and even desirable, Wen said inflation is still unacceptably high.
“We must try our best to bring about a bigger drop in inflation in the second-half of this year and lay a foundation for price controls for next year,” Wen said.
China’s inflation ran at 6.5 percent in July, far exceeding the government’s full-year inflation target of 4 percent.
Wen said China should “unswervingly” adhere to property tightening measures.
“We are now at a critical time when it comes to controlling the property market. Our determination should not be shaken, our policy directions should not change, and our efforts should not be relaxed,” Wen said.
While China would continue to discourage speculators from buying houses, Wen urged local governments to speed up the construction of government subsidised homes.
Wen said Chinese firms are facing increased pressures from rising labour costs, higher interest rates and a firmer yuan .
As such, he said policies must be prudent to avoid hurting the real economy.
Wen noted that China’s export sector would encounter “various difficulties and uncertainties”, and Chinese exporters would suffer from softer external demand and rising costs.
China’s official PMI showed that the new export order index had dropped to 48.3 in August from 50.4 in July.
Reporting by Zhou Xin and Koh Gui Qing; Editing by Ken Wills