China's Wen Vows Inflation Focus in Chat

By J.R. WU

BEIJING—In a broad-ranging chat with netizens in China Saturday, Chinese Premier Wen Jiabao reaffirmed Beijing's monetary policy stance and told the U.S. he didn't want this year to become a turbulent one in key bilateral ties.

Wen's comments come a week before the annual session of the National People's Congress, China's parliament, where—on March 5—Wen will deliver the Government Work Report, which will lay out Beijing's economic blueprint for 2010, including economic growth targets.

His remarks are likely a preview of the tone of the report, which isn't expected to offer detailed policy measures but should indicate Beijing is giving itself leeway to gradually exit from its crisis-driven expansionary policies of the past year as inflationary risks rise in the world's third-largest economy.

Wen said Saturday that 2010 will be a "complex" year for the domestic economy, but that he was confident about China's economic development. He said managing inflationary expectations is a key task this year in consolidating the recovery of the domestic economy.

"Currently we are still carrying out a moderately loose monetary policy. That is to say 'moderately loose' is on the one hand ensuring a stable and relative fast economic development, and on the other hand being able to manage inflationary expectations," said Wen during the two-hour online discussion that elicited more than 60,000 questions.

The online chat was done in the same fashion as one year ago, when Wen took questions from the online public in China for the first time. The Chinese leader, who is in charge of the country's economic portfolio, also spoke on subjects ranging from employment and housing needs at home to the Shanghai expo, healthcare and economic ties with Taiwan. Wen didn't discuss the yuan exchange rate.

China has nearly 400 million Internet users—the most of any country—and the live chat was carried on the central government's Web site.

Wen said China must curb speculative investments in the housing market, even as the government works to encourage home buying for real needs. He said the government must prevent the overly rapid rise of prices in general and part of the work to do that means money supply must be "appropriate."

Concerns about asset price inflation have been on the rise in China this year after the lending spree of the past year to stimulate economic growth. Policymakers in China have been tightening their oversight on bank lending and the People's Bank of China has already twice this year ordered banks to keep a larger portion of their reserves parked with the central bank in an effort to mop up the flush liquidity.

Wen said he believed the government could control consumer prices within a reasonable level.

When asked about ties with the U.S., China's second-largest trading partner behind the European Union, Wen said both powers must work together to lower trade tensions.

"We hope China-U.S. trade frictions can ease. We also don't hope for this year to become a 'non-pacific' year in the China-U.S. economic and trade relationship. This will require both sides to work together," Wen said.

He said trade frictions between China and the U.S. should be resolved through equal consultation, and not with trade sanctions, which hurts both sides.

Wen reiterated China's desire for the U.S. to recognize China's market economy status and for the U.S. to open up its high-technology exports to China.

Wen restated that China does not pursue a trade surplus and wishes its economic and trade ties with the U.S. to be balanced and sustainable.

Write to J.R. Wu at