MercoPress. South Atlantic News Agency

Davos: China admits crisis; Russia cuts defence outlays

China admitted the global financial crisis has had “a rather big impact” on its economy and Russia warned of over relying on the US dollar as a reserve currency, at the major World Economic Forum meeting in Davos, Switzerland.

Premier Wen Jiabao said China was experiencing rising unemployment in rural areas and "downward pressure on economic growth". But he added that China's economy was in good shape "on the whole". Wen Jibao said that among the reasons behind the current global downturn were "inappropriate macro economic policies in some economies, characterised by a low savings rate and high consumption". He also pointed to a "failure of financial supervision and regulation to keep up with innovation which allowed financial derivatives to spread". Addressing the Davos summit Russian Prime Minister Vladimir Putin called for a range of reserve currencies and said he envisaged the emergence of several strong regional currencies in the future. He advised against isolationism and state economic control as ways out of a "perfect storm" in the world economy. And he warned against military spending as a way to boost economic growth. "Excessive dependence on what is essentially the only reserve currency is dangerous for the world economy, therefore it would be expedient to encourage an objective process for the emergence of several strong regional currencies in the future" said Putin. Countries issuing such currencies should, argued Putin, show more policy openness. The US dollar continues to dominate accounting for 63.9% in 2007 compared with 25.5% for the euro and 4.7% for sterling. Premier Wen Jibao said the Chinese economy "is now under mounting downward pressure". China's economy grew by 9% in 2008, but only by 6.8% in the final quarter of the year, as overseas demand for China's exports shrank. "We are targeting a growth rare of about 8% in 2009. It will be a tall order, but I hold the conviction that through hard work, we can reach the goal." As the demand for China's exports shrinks, he said that as part of re-launching the economy, the country had to focus now on expanding domestic consumer demand. There would also be a sustained package of measures aimed at increasing economic growth, as well as a series of policy measures in the financial sector to boost economic growth. In addition, there would be industrial restructuring - with the phasing out of backward production practices - and particular attention would be paid to the key industries of cars, iron and steel. An "extensive use of new technology would increase competitiveness", as would an upgrading of science and technology, he said. "Will China's economy continue to grow fast and steady? Some people may have doubts about it, yet I can give you a definite answer," he said. "Yes, it will, we are full of confidence" he emphasized adding that China would "take prompt, forceful and effective measures" to ensure the health of its economy Russia's prime minister said he opposed spending money on defence as a way to boost economic growth as this only aggravated the problem. He called for a return to "balanced" world energy prices and a new international legal framework for energy security. Finally Putin said some protectionism might be inevitable amid a global crisis but he urged against "isolationism and unrestrained economic selfishness".