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WRAPUP 2-Wen says China set for five more fat years of growth

Published 03/04/2011, 09:34 PM

* Curbing inflation top priority for 2011 - Premier Wen

* Says China's long-term growth trend still strong

* Says government better placed to control economy, society

* Makes no mention of uprisings across the Middle East

(Adds more comments, details)

By Zhou Xin and Koh Gui Qing

BEIJING, March 5 (Reuters) - China is on course for another five years of robust growth although inflation threatens social stability and must be tamed, Premier Wen Jiabao said on Saturday.

In China's version of a "State of the Union" address to the annual parliament session, Wen said the top priority this year was to curb price rises that are making life difficult for ordinary people.

But in laying out a plan for the next five years, he said the drivers of China's meteoric economic rise were still in place and that the government was in an even stronger position to steer the world's second-largest economy toward prosperity.

"From a domestic perspective, factors favouring China's development and the positive long-term development have not changed," Wen said in a work report to the National People's Congress.

With tens of millions of people moving to cities from farms, the country further opening to global trade and investment and factories and computers spreading deeper into the hinterland, China would aim for growth of 7 percent a year from 2011 to 2015.

That would mark a slowdown from the 11.2 percent China averaged over the past five years. But the target is more of a worst-case scenario than a true forecast -- from 2006 to 2010, it had aimed for 7.5 percent growth.

"There is huge potential demand in the market, the supply of funds is ample, the overall scientific and educational level of the people is rising," Wen said. "The government's ability to exercise overall control and respond to major challenges has increased significantly."

INFLATION NOW

The premier's annual address is given in the cavernous Great Hall of the People, crowded with thousands of delegates vetted by the Communist Party to acclaim and approve its policies.

But Wen's televised speech is also aimed at hundreds of millions of ordinary citizens who Party leaders fear could become sources of anger unless grievances about price rises, unaffordable housing and expensive healthcare are eased.

Wen made clear that addressing those concerns would preoccupy China's economic policy, shaping decisions on everything from farmers' incomes to the yuan exchange rate.

"Recently, prices have risen fairly quickly and inflation expectations have increased," Wen said. "This problem concerns the people's well-being, bears on overall interests and affects social stability. We must, therefore, make it our top priority in macroeconomic control to keep overall price levels stable."

For 2011, the government aimed to contain average inflation to 4 percent, Wen said. Inflation has been running near a two-year high of more than 5 percent in recent months. Lofty home price rises have also defied government cooling efforts.

Failure to rein in price rises for food, housing and other goods could become more than an economic problem for the ruling Communist Party, which is jittery about social unrest, especially after the upheavals shaking the Middle East.

Wen said China was also looking to generate new sources of domestic demand that would wean economic growth off its reliance on cheap exports and infrastructure projects.

"Expanding domestic demand is a long-term strategic principle and basic standpoint of China's economic development as well as a fundamental means and an internal requirement for promoting balanced economic development," he said.

COMPLEXITIES

Wen did not mention the popular uprisings that have shattered authoritarian governments across the Middle East, and observers see scant risk of China's one-party state soon succumbing to mass unrest.

But his speech showed that leaders in Beijing want to head off such risks, particularly anger stemming from price rises and wage gaps.

"The world economy will continue to recover slowly, but the foundation for recovery is not solid. Economic growth in developed economies is weak," Wen added, noting that some countries still faced sovereign debt crises.

Wen has said government policies would focus on a rural population of 720 million people, including 153 million migrants who usually live and work outside their home towns, many working at building sites and factories that make cheap exports.

Stark income inequalities between urban and rural areas have stirred resentment and kept rural residents from joining the rising domestic consumption that Beijing hopes will drive growth. (Additional reporting by Ben Blanchard and Sui-Lee Wee; Writing by Chris Buckley and Simon Rabinovitch; Editing by Ken Wills, Don Durfee and Dean Yates)

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