China to set up US$10 bil. ASEAN fund

Wen spoke at the Boao Forum for Asia, an annual gathering of government and business leaders on the tropical southern island province of Hainan.

China's foreign minister said last Saturday that China had planned to establish a US$10 billion infrastructure fund for the Association of Southeast Asian Nations during last weekend's East Asia Summit cut short by the “red-shirt” riot in Thailand.

Wen said Saturday the country's stimulus package is working and the economy is “better than expected,” but he cautioned that complete recovery will take much more time because the global financial crisis continues to spread.

Wen, also China's top economic official, pledged to pull the country out of its slump by expanding domestic demand, building major infrastructure projects, finding jobs for college students and improving the social safety net.

The theme of this year's conference, which organizers said drew 800 executives, was “Asia: Managing Beyond the Crisis.”

The premier, the country's No. 3 ranking leader, said he was confident China could overcome the crisis but warned that global economic recovery will be a “long and torturous process.”

“We should not lose sight of the fact that the international financial crisis is still spreading, the basic trend of world economic recession is not reversed,” he said, adding that problems in the world's financial system were still unsolved.

But Wen said China was in relatively good shape because the country has sufficient capital, a solid banking industry, rich labor resources that will help it overcome the crisis.

The country's industrial output has gradually stabilized and there is “sufficient liquidity in the banking industry,” he said. Investment growth is gaining speed, and consumption is growing “fairly fast,” he said.

Wen's comments came just days after China announced its economy expanded at its slowest pace — 6.1 percent — in at least a decade in the first quarter.

“A series of economic stimulus measures adopted by China have shown initial results and there have been positive changes in economic performance, which has been better than expected,” he said.

His wording was nearly identical to that at a State Council, or cabinet, meeting this week after China said its economy grew at 6.1 percent in the first quarter from a year earlier.

While that was the weakest quarter in year-on-year terms since records began in 1992, analysts said it represented a rebound in quarter-on-quarter growth.

But Wen also said that China would still err on the side of the caution, sticking to its active fiscal policy and moderately loose monetary policy — which, in practice, have meant a surge in government spending and bank lending.

“We would rather over-estimate the severity of the situation and fully consider difficulties in making longer-term preparation for bigger difficulties,” he said.

Wen also said that the economic polices of countries which issue global reserve currencies require closer supervision as part of building a diversified international monetary system.

Wen and central bank governor Zhou Xiaochuan cautioned against jumping to the conclusion that China is already on the path to economic recovery, after data issued on Thursday showed signs of an upturn in momentum.

Wen's currency comments, an apparent reference to U.S. economic management that Beijing has blamed in part for the global financial crisis, were twinned with a pledge to promote more international use of the Chinese yuan.

Wen did not mention the United States by name but he has expressed concern in recent months about the safety of Chinese investments in U.S. dollar assets.

“We should strengthen the supervision of the economic policies of the main reserve currency economies and push forward the e

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