UPDATE 2-China’s Wen: global economy double-dip possible

* Too soon for countries to consider exiting stimulus

* High jobless rates, sovereign risks could still trigger dip

* No mention of yuan; full revival in China trade needs time

* Achieving China inflation target an important goal
(Writes through)

By Chris Buckley

TOKYO, May 31 (BestGrowthStock) – Chinese Premier Wen Jiabao warned
on Monday that global economic growth remained vulnerable to
sovereign debt risks and the possibility of a second downturn,
but said his own nation’s growth remained on track.

Wen told an audience of Japanese business executives that it
was too early for economies to consider exiting stimulus spending
that has shored up growth since the global financial crisis hit
in 2008.

But he also warned that mounting government debt risks could
frustrate full economic recovery.

“Some people say the global economy has already recovered,
and now we can consider exit mechanisms. I believe that this
judgement is premature,” Wen said in the speech, given on the
second day of a three-day visit to Japan.

High joblessness in the United States and other economies,
and sovereign debt risks laid bare by Greece’s crisis could all
drag down the global recovery and trigger a second dip in growth,
Wen said.

“Some countries have experienced sovereign debt crises, for
example Greece. Is this kind of phenomenon over? Now it seems
that it’s not so simple and we must take a full measure of the
difficulties,” he said.

“Some people ask is there the possibility of a double dip in
the world economy? I believe that we can’t say with absolute
certainty, and so we must undertake close observation and act to
prevent a double dip,” he said later.

“The world economy is stable and beginning to revive, but
this revival is slow and there are many uncertainties and
destabilising factors.”

Wen gave his blunt overview of the Chinese and world economy
in a speech that he said was not from a written script. No script
could be seen on the podium.


But the Chinese leader stayed away from mentioning the yuan
exchange rate, which many politicians and economists in the
United States and elsewhere say is held artificially low and is
exacerbating the global economic imbalances that Wen described.

Wen’s cautious assessment of China’s trade outlook suggested
that he could see dangers in quickly moving to lift the value of
the yuan, which would make the country’s exports relatively more

China’s exports appeared to have bounced back in the first
quarter, but that was compared to a low base last year, said Wen.
China recorded a $1.7 billion trade surplus last month, defying
expectations of a second straight deficit after March’s $7.2
billion shortfall. [ID:nTOE649026]

“For (Chinese) external trade to revive to pre-financial
crisis levels needs time and is a difficult process,” he said.

Those uncertainties make it all the more important for China
and other economies to refrain from exiting stimulus spending
policies launched to counter the financial crisis, said Wen.

“In these circumstances, all countries must coordinate in
unity and strengthen policy support for the economy. There cannot
be the least relaxation,” he said.

“To ensure that the (Chinese) economy continues growing in a
steady, relatively fast pace, we must maintain a certain level of
intensity in economic stimulus”, he said.

China’s economic growth reached 11.9 percent year-on-year in
the first quarter.

While China ploughs ahead with expansionary fiscal policies,
however, it will also keep a close eye on inflationary pressures
that have risen in recent months, Wen said.

China’s consumer price index (CPI) rose 2.8 percent in April
from a year earlier, nudging close to the target of keeping it
within about 3 percent across the year, he noted.

“Achieving this task is an important goal for this year,” he

Investing Advice

(Editing by Edwina Gibbs and Charlotte Cooper)

UPDATE 2-China’s Wen: global economy double-dip possible