MercoPress. South Atlantic News Agency

China rebounding but economy still “unstable” warns Premier Wen Jibabo

Wen Jibao in the midst of a controversy over monetary and fiscal policies

Premier Wen Jiabao has warned that China is still facing various uncertainties ahead despite signs of economic recovery, saying the government will maintain the macro economic policies.

“There are still a lot of unstable and uncertain factors ahead and the economic situation ahead is still very grave, although both the world economy and the national economy are making positive changes now,” Wen Jibao said during an inspection tour to east China's Zhejiang Province over the weekend.

He said there have been increasingly more positive signs in the country's economic performance, but stressed that the country's economic recovery is still “unstable”, “not consolidated”, and “unbalanced” and warned against blind optimism.

Wen Jibao reiterated that China must maintain stable macroeconomic policies, namely its “moderately loose” monetary policy and “active” fiscal policy. He didn't raise concerns about inflation, but said China should “ensure market liquidity is reasonably ample.”

He called for “strengthening the balance and sustainability of credit in supporting economic and social development.”

Earlier this month the People's Bank of China (central bank) said it will fine-tune its policies based on the economic situation and changes in prices. Expectations that Beijing might rein in loan growth caused sharp falls in Chinese stock prices for much of this month, reverberating through markets around the world.

Last week, lawmakers, including former central bank Vice Governor Wu Xiaoling, voiced concern about the potential risks of the enormous stimulus efforts. Lawmaker Yin Zhongqing said that new Yuan loans, which surged to nearly eight trillion Yuan in the first seven months, should be limited to 10 trillion Yuan for the full year.

Wen Jibao added that policy makers must “unify our thoughts toward the judgment of the central government in the economic situation, and unify our actions toward carrying out the decisions of the central government” regarding the raft of measures to combat the global financial crisis.