* Wen: High property prices could imperil social stability
* Wen's tone on overall economy unmistakably optimistic
* Urges more domestic consumption, development of interior
* Says foreign firms to be treated equally with Chinese firms
(Adds links, quotes)
By Benjamin Kang Lim and Aileen Wang
TIANJIN, China, Sept 13 (Reuters) - Stabilising house prices is an essential task for every level of government in China, Premier Wen Jiabao said on Monday, underlining how concerns about a red-hot real estate market have become a central focus of policymakers.
Runaway property prices are not only a grave threat to the economy, but could also undermine social stability if left unchecked, Wen said in an address to a meeting of the World Economic Forum in the northern port city of Tianjin.
"It is the key responsibility of all levels of governments to stabilise housing prices and to guarantee availability of housing," he said.
China has been trying to curb property prices, which have soared over the past year and threaten to swell into a bubble that analysts warn would endanger the world's fastest-growing major economy.
Beijing has struggled to get growth-obsessed local
governments to implement centrally directed policies to cool the
property sector. Wen's remarks made clear that officials will be
evaluated on their success in stabilising house prices, a
powerful incentive in China's political system.
HIGHLIGHTS: Speakers at WEF in China [ID:nTOE68C03P]
GRAPHIC: Chinese output http://link.reuters.com/gaw58n
Wen sounded a strongly confident note about the broader health of the Chinese economy and called repeated attention to country's role in promoting global recovery from the international financial crisis over the past two years.
Speaking to an audience of global executives and government officials, he also sought to allay concerns about regulations that foreign firms worry could put them at a disadvantage in the Chinese market. He said any foreign firm registered in China would be given equal treatment to their local rivals. For related story, see: [ID:nTOE68C086]
A CALL TO ACTION
Wen focused his speech on many of the long-term structural goals of Chinese economic reform: the need to promote more domestic consumption, to support the development of the lagging interior and to ensure a fairer distribution of income.
But his words on the property market stood out as an immediate call to action for officials across the country.
"The housing issue is not only an economic problem but also an issue of people's livelihood that affects social stability," he said.
Property prices have begun to stabilise, according to official data, after a months-long crackdown on speculative investment by the government. But local media are also full of reports of frenzied buying returning to the market in recent weeks.
There have been questions about whether the government has the resolve to step up its property tightening, for fear of tipping the economy into a slowdown. However, Wen's tone about the overall economy was unmistakably optimistic, suggesting that Beijing is not about to back down from its real estate policies.
"At present, China's economy is in good shape with relatively fast growth, a better structure, increasing employment and stable prices," he said.
"In the second quarter and after, some economic indicators showed signs of slowdown, but that was mainly caused by a high base of comparison and government controls. We have the confidence, the conditions and the ability to maintain stable and relatively fast economic growth," he said.
Chinese industrial production and capital spending both surprised on the upside in August, highlighting how China has remained buoyant even as the United States and Europe have struggled to shore up their recoveries. [ID:nTOE68A00H]
FISCAL RISKS
Wen said there was nothing mysterious about China's success.
"We have implemented an active fiscal policy and an appropriately loose monetary policy in an unprecedented stimulus package," he said. "At the same time, we have successfully controlled the fiscal and financial risks."
Much of the government's burst of spending last year was financed by bank lending, and analysts say the cost will eventually hit home in the form of an increase in defaults.
But Wen said the banking sector was in a strong position, with an industry-wide capital adequacy ratio of 11.1 percent and a non-performing loan ratio of just 2.8 percent.
He also said that the risks of rapid lending to local governments, though serious, were being brought under control.
"We have launched measures to enhance the management of local government financing vehicles and are in the process of intense implementation," he said. (Writing by Simon Rabinovitch; Editing by Ron Askew)