China says economy still strong

November 14, 2008

, BEIJING, November 14 – China said on Friday the fundamentals of its economy remained strong amid the global financial crisis and it was confident of maintaining fast growth.

Following a slew of figures released this week showing growth in the world\’s fourth largest economy was continuing to slow, senior government officials insisted the country was weathering the international storm.

"The origin of the financial crisis is outside the country and its impact on our financial system is limited. The fundamentals of our economy are still good," National Development and Reform Commission vice chairman Mu Hong said.

Mu pointed to a stimulus package worth four trillion yuan (586 billion dollars) announced over the weekend as proof of the government\’s ability and commitment to keeping the economy growing swiftly.

"I think the central government\’s decision to make significant changes to economic policy … showed its firm determination and confidence in stabilising the economy and maintaining fast growth," he said.

"This determination and confidence are not baseless. They are based on the judgements of the domestic and international economic environment and the situation in China."

Speaking at the same briefing on the financial crisis and China\’s response, central bank vice governor Yi Gang said the nation\’s banking system had plenty of money, indicating no concerns about a US-style credit crunch.

"The liquidity in China\’s financial market is generally abundant," Yi said.

"Before the US financial crisis, we had excess liquidity. At present, our liquidity is abundant."

Yi also sought to reassure the world that it was not about to panic and sell its enormous US assets, gained in recent years via its foreign exchange reserves, the world\’s largest, but which have depreciated sharply during the crisis.

"China inevitably has to invest its forex reserves in the overseas market and we are very responsible about our forex investment," Yi said when asked about investing in US financial assets.

"We will deal with the current financial tsunami in a responsible and steady manner… this responsible and steady attitude, instead of the attitude of selling off in a panic, will benefit the overall financial market."

Nevertheless, Mu cautioned that China understood the severity of the situation.

"The international financial crisis is a new challenge for us and a serious challenge. We definitely will not underestimate the severity of the impact," he said.

China\’s economic growth slipped to 9.0 percent in the third quarter, its slowest pace in five years, and data for October released this week indicated the deceleration was continuing.

Industrial production grew 8.2 percent in October from the corresponding month a year ago compared with 11.4 percent in September, the National Bureau of Statistics said on Thursday.

A day earlier, the government said inflation had fallen to a 17-month low of 4.0 percent in October, down from 4.6 percent in September and a 12-year high of 8.7 percent in February.

Yi said Friday that inflation in China had been brought under control but deflation was now a risk.

"The Chinese government has successfully brought under control the inflation issue," he said.

"The policies we are planning for the rest of this year and next year, including a proactive fiscal policy and a moderately easy monetary policy, are all aimed at effectively preventing possible deflation."

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