BEIJING (Reuters) - Chinese Premier Wen Jiabao warned on Wednesday that overheating remains his nation's top economic foe even as global growth softens, vowing a tough fight against price rises and feverish investment. In his annual "state of the nation" report to parliament, Wen targeted pollution, misgovernment and the gulf between the urban rich and farming poor as China prepares to go on show at the Olympic Games.
By Jason Subler and Simon Rabinovitch
BEIJING (Reuters) - Chinese Premier Wen Jiabao warned on Wednesday that overheating remains his nation's top economic foe even as global growth softens, vowing a tough fight against price rises and feverish investment.
In his annual "state of the nation" report to parliament, Wen targeted pollution, misgovernment and the gulf between the urban rich and farming poor as China prepares to go on show at the Olympic Games.
But he mostly dwelt on the risks that heady inflation poses to China's social fabric and double-digit growth, which has transformed the country into the world's fourth-biggest economy.
!ADVERTISEMENT!"The current price hikes and increasing inflationary pressures are the biggest concern of the people," Wen told nearly 3,000 deputies of the National People's Congress, gathered in the Great Hall of the People guarded by cordons of police.
As Wen and President Hu Jintao head into a second five-year term running the country of more than 1.3 billion people, they have vowed to build a "harmonious society" freed of strains over inequality and noxious air and water.
Yet Wen's speech underscored how deeply Beijing remains preoccupied with generating jobs and lifting incomes, especially for hundreds of millions of poor farmers, while also taming hectic industrial expansion that has bucked cooling measures.
"The primary task for macroeconomic regulation this year is to prevent fast economic growth from becoming overheated growth and keep structural price increases from turning into significant inflation," he said.
Consumer inflation averaged 4.8 percent last year, well above the government's 3 percent target, mostly due to big rises in the cost of food and housing, Wen noted. Annual consumer inflation hit an 11-year high of 7.1 percent in January.
"Because factors driving prices up are still at work, upward pressure on prices will remain great this year," Wen said, vowing "powerful measures" to counter inflation, including support for boosting food and grain production.
Wen's report was a "warning" to local officials, many newly promoted and keen to stand out with big-spending projects, that fighting inflation should be their priority, said Mao Shoulong, a public policy expert at the People's University of China.
"Inflation is a test of the government's ability to enforce macroeconomic controls, and Premier Wen wanted to warn these local officials to take this test seriously -- for economic reasons and for social stability," Mao told Reuters.
By contrast, Wen made only glancing reference to the credit crunch and global economic slowdown that have spooked the United States and Europe, saying that China would watch developments and "take prompt and flexible measures."
OLYMPICS SPOTLIGHT
Beijing will host the Olympic Games in August, and the vast preparations have drawn a sometimes uncomfortable international gaze on China's environmental and social strains.
Wen stressed that the Games, and the following Paralympics, could promote China to a world sometimes wary of its fast-expanding economic and political clout.
"All sons and daughters of the Chinese nation are looking forward to them," Wen said of the sports spectacles. "They will be of great importance in promoting China's economic and social development and increasing friendship and cooperation."
But, accompanied by 41 dutiful rounds of applause from the ranks of deputies, Wen sought to turn some attention to longer-term worries over pollution, inequality and corruption.
Heavy polluters would be a target of government efforts to stifle excessive investment, Wen said. He also promised more spending on sewage treatment, clean energy, and repairing polluted rivers and lakes.
The national parliament, whose members are carefully vetted by the Communist Party, is due to pass a government reorganization plan intended to cut red-tape and corruption.
"Oversight mechanisms and checks on government authority are not strong enough," Wen told the delegates, most of them Communist Party members and state officials.
In a small reminder of the unrest that worries the government, a lone protester threw leaflets into the air outside the Great Hall, decrying official corruption in the northern province of Shanxi. She was quickly taken away by police.
One of the longest bursts of applause in Wen's poker-faced delivery came when he warned Taiwan, the self-ruled island that holds its presidential election on March 22, that China would never abandon its demands to unite the island into "one China."
(Additional reporting by Zhou Xin, Emma Graham-Harrison and Eadie Chen, Ben Blanchard, Lindsay Beck and Lucy Hornby; Writing by Chris Buckley; Editing by Nick Macfie and Alex Richardson)
