China Premier Wen Jiabao sounded his most upbeat note this year on Beijing's fight against inflation, saying he expects price pressures to decline steadily even as the country keeps up its brisk economic growth.
In an opinion piece published in yesterday's edition of the Financial Times, Wen wrote he was "confident price rises will be firmly under control this year", and that China is "fully capable of sustaining steady and fast economic growth".
Wen's remarks came as he kicks off a visit to debt-stricken Europe and is a timely response to investor worries that China, in its struggle to tame near three-year high inflation, could over-tighten monetary policy at the expense of economic growth.
"There is concern as to whether China can rein in inflation and sustain its rapid development," Wen wrote. "My answer is an emphatic yes... China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked," he said.
"The overall price level is within a controllable range and is expected to drop steadily." But some analysts said it was too early for China to declare victory in its fight against inflation, and warned investors against thinking that Wen was signalling an imminent change in monetary policy.
Ting Lu, an economist at Merrill Lynch-Bank of America, argued Wen might have deliberately sounded so positive as he knew he was addressing foreign readers of Financial Times. In Chinese culture, there is a tendency to play up one's achievements when speaking to the outside world, and swing the pendulum the other way to emphasise challenges when speaking to those of one's own, Lu said.
From / Gulf News