February 2, 2009 / 12:24 AM / 10 years ago

China's Wen sees light at end of tunnel

LONDON (Reuters) - Chinese Premier Wen Jiabao said on Monday there was “light at the end of the tunnel” but called for strong and effective stimulus plans to boost economies hit by the global financial crisis.

Britain's Prime Minister Gordon Brown stands with Chinese Premier Wen Jiabao inside 10 Downing Street in London, February 2, 2009. REUTERS/Oli Scarff/Pool

“In some places people are disappointed, people are frustrated and people are pessimistic. They are quickly unsettled by the current situation,” Wen told a business conference during a visit to London.

“There is light at the end of the tunnel ... I am calling for confidence, cooperation and responsibility, I’ve been calling for that all along because if we do that we can save the world.”

The conference was also attended by British Prime Minister Gordon Brown, who is preparing to host a summit of world leaders in April at which new measures to tackle the effects of the global credit crisis will be outlined.

About 20 million Chinese rural migrants have lost their jobs as growth falters, fuelling fears of social unrest.

China’s economic growth slowed to an annual rate of 6.8 percent in the last quarter of 2008, dragging down the pace for the year as a whole to 9.0 percent - the lowest in seven years.

The Chinese government has already pledged 4 trillion yuan ($585 billion) over the next two years to help boost domestic demand. Work is under way on projects including rebuilding earthquake-hit southwestern China and improving road and rail links.

Wen told the Financial Times that more might be needed.

“We may take further new, timely and decisive measures. All these measures have to be taken pre-emptively before an economic retreat,” he said in an interview published late on Sunday.

Speaking at a dinner on Sunday evening, Wen said he had seen signs of a revival in the Chinese economy in the last 10 days of 2008.

BLAME GAME

Tensions have flared between China and the United States in recent days after the new U.S. administration accused China of manipulating its exchange rate to boost exports.

Asked about the origins of the financial crisis, Wen signaled that he believed the U.S. had to take a large share of the blame.

“The causes for this financial crisis are obvious. The main causes are that some economies have imbalances in their economic structure. For a long period of time they have had dual deficits, trade deficit and fiscal deficit, and they have been overspending by borrowing,” he said.

Slideshow (4 Images)

China has helped to bankroll the United States by investing heavily in U.S. debt.

Wen also criticized the Western banking model.

“Some financial institutions pursued profit in a blind way without effective regulation. They have been using excessive leverage to gain huge profit but when the bubble bursts the world is exposed to disasters.”

Additional reporting by Daisy Ku and Sumeet Desai; writing by Keith Weir; editing by Stephen Nisbet

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