DALIAN, China (XFN-ASIA) - China's economy is in good shape overall, but further reforms and macroeconomic controls are needed to prevent excessive growth, Premier Wen Jiabao said.
Speaking at the World Economic Forum in Dalian city, Wen said he remains confident that China will overcome its challenges and continue to develop into an open, socialist market economy.
He also said economic development cannot occur in isolation, and that China is committed to opening up its market and pursuing political reform.
'China has transformed itself from a closed, to a semi-closed planned economy, to an open socialist market economy. But it is still a developing country with a weak economic foundation. We will deepen reform - economic, social and political ... we will improve the effectiveness of macrocontrols,' Wen said.
'Without political reform, economic development will not happen ... politically, democracy is being expanded and the rule of law strengthened to promote social equity, justice and harmony,' he said.
He added that major economic challenges include reducing China's huge trade surplus, excessive investment, inflationary pressures, and oversupply of credit.
Wen said trade friction should be addressed through dialogue. China has come under mounting criticism from the US and other countries over issues such as trade imbalance, its currency policy, poor product standards and a lack of protection of intellectual property rights.
China's trade surplus stood at 136.8 bln usd in the first seven months of the year.
Wen said China will continue with gradual exchange rate reform. Critics of Beijing's currency policy maintain that the yuan is undervalued by up to 40 pct, giving the country an unfair trade advantage.
In 2005, China switched the yuan from its dollar peg to a trade-weighted basket of currencies. It has appreciated steadily since, but not fast enough in the eyes of some critics.
Wen also said the government takes food safety and product quality 'very seriously', adding that controls will be strengthened.
China has come under international scrutiny after a spate of complaints in the US and other markets over products ranging from tires to toothpaste.
Wen added that enhancing product quality and food safety is a common task for the international community.
He also stressed that as part of Beijing's commitment to its policy of 'opening up', more efforts will be made to protect the rights of foreign companies doing business in China.
'We are improving related laws and regulations governing foreign economic activities. We will protect the rights of these companies particularly intellectual property rights, and we will create an open, transparent and fair market for these companies,' Wen said.
He added that China needs to develop its rural areas to ensure a more equal share of growth for those living in the countryside, while the government will also work on a 'proactive employment policy' for the country's vast labor force.
China will also press on with its energy-saving efforts and continue work to reduce pollution, energy consumption, and emissions.
He said China has in place a national program to tackle climate change, and that the nation will also work with the international community on the issue.
Wen also underlined his aim for peaceful development, adding that China 'will never pose a threat to any country'.
'We cannot achieve development in isolation, and the world also needs China,' he said.
will.davies@afxasia.com
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