China's Wen calls for firm inflation controls

Chinese premier Wen Jiabo called for firm control of inflation but warned the country still faced serious economic challenges, as he visited a southern manufacturing hub, state media said on Sunday. Wen said China had already been tested but managed to protect growth at a time of turbulence in global markets.
"The country had already faced serious economic tests this year, and its continued favourable development has been hard won," the official Xinhua agency quoted him saying.
"China must increase its awareness of risk and preparation for all eventualities, and with a firm faith, strong spirit, and hard work diligently implement the goal of stable and fast economic development and control the fast-rising cost of goods." To the relief of Beijing, consumer inflation ebbed to 7.1 percent in the year to June, well down from February's peak of 8.7 percent and in recent speeches top officials no longer described the battle to slow price rises as a "top priority".
But even if inflation continues to drop, there are other serious challenges facing the economy. Growth has slowed with gross domestic product up 10.4 percent in the first half of 2008 compared with the same period last year. In 2007 China sizzled to its fastest growth since 1994 at 11.9 percent.
The country is also battling weaker exports and an overly fast rise in foreign exchange reserves.
China's trade surplus fell 12 percent in the first half from a year earlier, though surging prices for oil and commodity imports were the main cause. Nonetheless the government is under pressure from increasingly vocal exporters to provide them with more support, and Wen attempted to reassure manufacturers on the visit.
"I know you are facing pressure from rising input costs, and a shrinking consumer market, but I understand your greatest concern is foreign trade policy," state television showed him telling journalists and officials on a busy factory floor. "I can answer you that our foreign trade policy will be basically stable," he added - though that may be little comfort for businessmen hoping Beijing will back-pedal on existing policies aimed at curbing some exports of goods such as textiles.