Chinese Premier Wen Jiabao Warns of Double-Dip Recession

Mr. Wen said yesterday China would not give in to foreign pressure to raise the value of its currency or withdraw stimulus measures put in place in late 2008 to pull the country out of the crisis.

In a rare two-hour news conference at the end of China's annual session of parliament, Mr. Wen called for more reforms to the world's fnancial system as China ponders policy choices aimed at fghting rising infation while increasing domestic demand.

"The unemployment rate of the world's main economy is still high, some countries' debt crises are still deepening, and the world's commodity prices and exchange rates are not stable, which are most likely to become the cause of any setback in the economic recovery,'' Mr. Wen said yesterday in Beijing's Great Hall of the People.

"The shock of the global economic crisis on the Chinese economy in some degree imposed on our development model, which cannot be changed in a short time and needs our constant efforts."

Mr. Wen is now attempting the delicate balancing act of withdrawing the massive stimulus of government funding and state-sponsored bank lending which totalled 12 trillion yuan ($1.92 trillion) last year while trying to fend off infation and proceed with structural economic reform.

As part of its efforts, China is also trying to marshall the forces of its steel sector to fend off a massive hike in iron ore prices that could now be as much as 90 percent.

Mr. Wen yesterday blamed the US for deteriorating relations between the two countries.China has been under increasing pressure to allow its currency, to appreciate, removing the effective peg to the US dollar that has been in place for more than a year since the fnancial crisis gripped the world.

US President Barack Obama ratcheted up his rhetoric, urging China to appreciate its currency, saying a "market-oriented'' exchange rate was "an essential contribution to the global rebalancing effort''.

Mr. Wen fred back, saying the currency was not undervalued and a country's exchange rate policy "should depend on its national economy and economic situation".

"We are opposed to the practice of engaging in mutual fnger-pointing among countries or taking strong measures to force other countries to appreciate their currencies," Mr Wen said.

By keeping its currency at a level many economists believe is at least 20 percent below what it would be if the market dictated its rate, most analysts and Western nations believe that the world's largest trading nation is gaining an unfair advantage.

Pressure over China's currency, along with a $6.4bn arms sale to Taiwan and a meeting between Mr Obama and the Dalai Lama, have heightened tensions between Washington and Beijing. ``The responsibility does not lie with the Chinese side but with the US,'' Mr. Wen said.

Despite China's leaders explaining that they understood the country needed to restructure its export and heavymanufacturing-dependent economy, they have given scant details about how they will step up reforms, particularly for the country's 800 million rural citizens who are becoming more restive as the income gap between them and the urban middle classes widens.

Wang Jianxun, from the China University of Political Science & Law said, ``Many problems were talked about at the NPC, such as housing, the monopoly of state-owned enterprises and income disparity but no major and meaningful measures were presented.''

There is rising concern among many economists about infation after the country's consumer price index hit 2.7 percent in February, as well as the level of local government debt.