China's Wen targets inflation as stability threat

China's Premier Wen Jiabao said on Saturday the nation had to tame inflation that threatened social stability as the government seeks to steer the world's second-biggest economy toward more balanced, greener growth.

In China's version of a State of the Union address to be presented later to the annual parliament session, Wen said the government aims to contain inflation to within 4 percent this year.

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.

Recently, prices have risen fairly quickly and inflation expectations have increased. 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, Wen said in a work report prepared for delivery before the National People's Congress.

Wen said that inflation was among the immediate worries weighing on China's efforts to unleash new sources of domestically driven growth that will spread wealth more evenly.

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, said the prepared text of his speech.

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

But the Premier's televised speech is also aimed at hundreds of millions of ordinary citizens who the Party leaders fear could become sources of discontent unless their 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.

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 Wen's speech showed leaders in Beijing want to head off any such risks and was also wary of external economic shocks.

This year, our country still faces an extremely complex situation for development, he said.

The world economy will continue to recover slowly, but the foundation for recovery is not solid. Economic growth in developed economies is weak, he added, noting that some countries are still under the threat of their sovereign debt crises.

Chinese consumer prices in January rose 4.9 percent from a year earlier, accelerating from 4.6 percent in December but lower than the 28-month high of 5.1 percent in November. Lofty home price rises have defied government cooling efforts.

Those policies also form a cornerstone of the government's efforts to generate new sources of domestic demand that will wean economic growth off its reliance on cheap exports and showcase infrastructure projects.

Wen has said these efforts will focus on China's 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.