CHINA''S Premier, Wen Jiabao, has warned that the world risks sliding back into recession and says his country faces a difficult year trying to maintain economic growth and spur development.
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 financial system as China ponders policy choices aimed at fighting rising inflation while increasing domestic demand.
The Prime Minister pointedly highlighted - as he wrapped up the country''s once-a-year, 10-day parliamentary session, the National People''s Congress - how surging commodity prices had been at the centre of disputes with Australia.
"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 inflation 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 per cent.
China''s and Australia''s economies have become more intertwined in recent years: the country is now our largest trading partner with two-way trade surging to $83 billion in the year ending last June 30, and in December it passed Japan as our largest export market.
Any trouble in China''s economy would quickly resonate in Australia.
Mr Wen yesterday blamed the US for deteriorating relations between the two countries.
China has been under increasing pressure to allow its currency, the renminbi, to appreciate, removing the effective peg to the US dollar that has been in place for more than a year since the financial crisis gripped the world.
Two days ago, 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 that global rebalancing effort".
Mr Wen fired back yesterday, saying the renminbi 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 finger-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 per cent 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 heavy-manufacturing-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, told The Australian: "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 inflation after the country''s consumer price index hit 2.7 per cent in February, as well as the level of local government debt.