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Premier Wen vows to help markets

(AP)
Updated: 2007-03-02 09:15

Investors look at stock information at a securities company in Shanghai February 27, 2007. [newsphoto]

BEIJING -- China's premier promised to improve its turbulent financial markets but announced no new initiatives in a speech published Thursday but written before this week's stock plunge.

"The foundations for stable operation of the stock market are not firm. There are still many problems that must be resolved," Premier Wen Jiabao said in the speech published in the Communist Party magazine Seeking Truth. It said Wen made the remarks Jan. 19 at a conference on the government's financial work.

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Building modern stock and bond markets to finance China's economic development "is the major task facing us," Wen said.

China's main stock index fell nearly 9 percent on Tuesday, the biggest one-day drop in a decade, triggering a selloff in markets abroad. Prices rebounded on Wednesday, rising nearly 4 percent, before falling again on Thursday by 2.9 percent.

Wen's speech repeated government pledges to clean up China's stock markets. But it included no new initiatives and gave no indication whether Beijing might speed up the easing of currency controls or other reforms.

China's stock markets suffer from poor regulation, lack of reliable information from companies, insider trading and other handicaps.

"We need to improve the quality of companies, to establish a system of information release, to improve transparency and to improve investor confidence," Wen was quoted as saying.

He promised to build a "fair, open market mechanism" and protect the interests of small investors.

Wen also cautioned that China faces mounting problems from its swollen trade surplus, growing foreign currency reserves and excess liquidity, which Chinese leaders worry could ignite inflation.

"We must see clearly that solving the problems of international imbalances is a problem that we are going to face in the long term," he said.

Wen repeated Beijing's promise to allow a more flexible exchange rate for its currency, the yuan, but gave no timetable. The United States and other trading partners say the yuan is kept undervalued, giving Chinese exporters a price advantage and hurting foreign competitors.

Wen said China will explore more profitable ways to use its US$1 trillion-plus in foreign reserves, which now are invested mostly in U.S. Treasury bills and other safe but low-yielding instruments.