Premier Says China Will Let Currency Appreciate Gradually

In a plodding two-and-a-half-hour news conference at the conclusion of this year’s national legislative conference, Mr. Wen said China’s grass-roots elections should be expanded to higher levels of government, but stressed that change must occur “step by step,” under the control of the Communist Party.

On the delicate topic of the revolts and revolutions that have besieged authoritarian Arab governments in recent months, he said China’s record of speedy economic growth and fast-rising living standards made analogies with those countries “not right.”

Mr. Wen spoke as the National People’s Congress, in a vote whose results were preordained, approved the country’s new five-year development plan. Its strategy promises a surge in government spending on domestic security and social programs like medical insurance, but offers little in the way of legal, political or banking reform. One principal goal, the government has said, is to lessen economic dependence on factory exports and build up innovation and domestic consumption.

Mr. Wen described the war on inflation as the government’s top priority. Figures released three days earlier showed that consumer prices rose 4.9 percent in February compared with the same month a year before, the latest in a series of indications that China’s economy is beginning to overheat.

The prime minister partly blamed international factors for the soaring costs, among them spiking oil prices because of the unrest in the Middle East and North Africa. He also pointed to looser monetary policy in the United States, where the Federal Reserve had expanded monetary supply in recent months — a policy known as quantitative easing — in an effort to assist the economy.

But Mr. Wen also said China must continue to “mop up excess liquidity” at home if it is to hold prices in check. China has repeatedly ordered banks to issue less credit to curtail the money supply.

Figures issued Monday suggested that the restrictions could be taking hold. Compared with the same period a year ago, bank lending slowed in February, as did the growth in the money supply, as broadly measured by a yardstick known as M2.

Besides tightening monetary policy, Mr. Wen said, the government will hold local officials more strictly accountable for curbing housing prices and food prices. “Inflation is like a tiger,” he said. “Once set free, it will be very difficult to put the tiger back in its cage. We must not take this issue lightly.”

Economists have urged China to allow the renminbi to appreciate in value to help curb inflation. But internationally, critics say that China artificially holds down the value of the renminbi against the dollar and other currencies to increase its exports. American officials also argue that this keeps the cost of American goods high and so limits China’s imports.

Mr. Wen promised that the increase in the renminbi’s value would continue. But he added: “It should be a gradual process because we must bear in mind its impact on Chinese businesses and the employment situation.”

He stressed that China’s five-year target of a 7 percent annual rise in the gross domestic product should not be considered low, insisting, “it will not be easy for us to achieve.” That is a drop, however, from the 7.5 percent goal of the past five years, which was ludicrously low: the economy grew an average of more than 11 percent annually during that period.

Mr. Wen reiterated his position that a lack of political reform could threaten China’s economic advances, singling out corruption as the Communist Party’s single biggest threat. He praised the development of village and local elections, saying, “If we are to address the people’s grievances and meet their wishes, we must create conditions for people to criticize and supervise the government.”

But Mr. Wen, who mentioned the need to reform China’s political system just once in the annual work report he submitted to the legislature, was no less circumspect at the news conference.

He stressed that any change must take place under the leadership of the Communist Party. “It requires a stable and harmonious social environment, and it needs to be taken forward in an orderly way,” he said.