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Top banker: Timely steps can maintain growth

By Wang Xu (China Daily)
Updated: 2008-12-05 07:21

US Treasury Secretary Henry Paulson (front) shakes hands with Zhou Xiaochuan (2nd R), governor of the People's Bank of China, before the opening session of the fifth China-US Strategic Economic Dialogue in Beijing, Dec 4, 2008.[Agencies]

China should prepare for the worst and take "timely and effective measures" to overcome the global financial crisis and maintain growth and stability, the central bank governor said on Thursday.

Special coverage: The 5th China-US Strategic Economic Dialogue Related readings:  Commerce chief: Yuan's depreciation "small and normal"  Yuan's fall not part of policy  Coping with financial crisis a common task of China, US

Speaking at the fifth China-US Strategic Economic Dialogue (SED), Zhou Xiaochuan, however, expressed confidence that China would sustain its growth and financial stability.

Nevertheless, policymakers "need to prepare for the worst," Jin Qi, head of the bank's international department, quoted Zhou as having said.

"Excessive consumption in the US and over-reliance on debt are the key reasons behind the (global financial) crisis," Zhou, said, urging the US to increase savings and reduce its budget and trade deficits.

"For China, the key to maintaining stable growth is increasing domestic demand," Zhou said. "We should use the crisis as an opportunity to increase consumption and expedite the transformation of China's development pattern."

The country's economy has been slowing down over the past few months, largely because of a slump in the property market and shrinking overseas demand.

On the global front, things do not look like improving in the near future because major economies such as the US, Japan and many European Union countries have entered into recession.

The country's GDP growth dropped to 9 percent in the third quarter of this year, the lowest in five years.

The forecast for next year does not look brighter either because the World Bank has slashed it to 7.5 percent, the lowest in almost two decades. Government authorities, though, have said the country could have a growth rate of 9 percent next year.

"China has announced a series of measures to spur domestic demand, which is a significant move for world economic and financial stability," Vice Premier Wang Qishan said in his opening speech at the SED Thursday. "We hope the US takes necessary steps to stabilize the financial market and the economy."

Apart from the $586-billion stimulus package, the government will also use further interest rate cuts and other necessary measures to maintain ample liquidity.

The announcement came on Wednesday, a day before the European Central Bank cut its benchmark lending rate from 3.25 to 2.5 percent, the steepest rate cut in the past decade.

The sudden fall of the yuan against the US dollar has triggered speculation over further revaluation of the Chinese currency. The yuan recorded its highest one-day fall against the dollar on Monday, and has being sliding since. It closed at 6.88 to a dollar on Thursday, down from its peak of 6.80 on Sept 23.

Commerce Minister Chen Deming, however, said at the SED that the yuan's movement this week was normal and its fall can be attributed to the rise of the dollar against other currencies.

A top US Treasury official said at a media briefing at the SED on Thursday that "China's currency reform has progressed well in the past two years" and the "Chinese leadership" is committed to the reform.

"Our focus is still on the long term," the official said when asked about the yuan's sudden fall. "We've seen a continued rise of the yuan over time."