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China paper urges domestic boost to counter US crisis
24 Sep 2008 02:01:04 GMT
 Source: Reuters
BEIJING, Sept 24 (Reuters) - China must force through "difficult adjustments" to cope with fallout from the U.S. financial crisis and slowed global demand for Chinese exports, a leading state newspaper said on Wednesday.

The front-page commentary in the overseas edition of the People's Daily said the limited openness of China's financial system gave it some "immunity" from direct damage from the credit crunch and financial failures engulfing Wall Street.

But the paper, the public platform of the ruling Communist Party, said China nonetheless had to prepare for tough times as slowed global growth saps demand for its goods.

"...the even sterner challenge in the future may not be the direct contagion, but the pressure to transform the growth model," said the commentary by a senior editor at the paper.

"What confronts us is not merely how to absorb the lessons and prepare further responses, but we must also more actively undergo structural adjustment and promote domestic consumption."

The overseas edition of the People's Daily is a smaller circulation of the main paper. Its pronouncements do not necessarily emerge directly from the Party leadership, but this and a similar warning over Wall Street in the paper last week suggest the scope of official debate over how China should respond.

The latest commentary focused on the need to pursue domestic reforms that will spur spending at home.

"As the international market softens, this may create a production capacity glut," it said, urging increased investment in social security, medical care and education to lift domestic consumption.

China has a huge stake in the health of the U.S. financial system. American consumers buy many Chinese exports, and the U.S. trade deficit with China hit a record $256.3 billion in 2007. As well, an estimated two-thirds of Beijing's $2 trillion in foreign exchange reserves is invested in dollar bonds.

A commentary in the same newspaper last week said the "financial tsunami" meant the world must consider building a financial order no longer dependent on the United States.

China's top leaders have avoided saying much publicly about Wall Street's problems. On Monday, President Hu Jintao and U.S. President George W. Bush discussed the crisis and steps the United States was taking to stabilise international markets. (Reporting by Chris Buckley; Editing by Nick Macfie)


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