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Chinese premier: Stimulus working

By the CNN Wire Staff
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Get to know the Chinese Premier
  • NEW: Exchange policy of a country is not necessarily linked to trade surplus, Wen says
  • NEW: Freedom of speech is indispensable for any country, he says
  • China's premier says stimulus cas created economic growth
  • Management of inflation expections is important, Wen says

(CNN) -- Chinese Premier Wen Jiabao says his country's huge stimulus plan will continue to create economic growth, as long as inflation expectations are well-managed.

"The implementation of the stimulus package has ensured the continuance of steady and relatively fast economic growth in China," Wen said in an interview aired Sunday on CNN's "Fareed Zakaria GPS."

The stimulus, which is 10 times larger as a percentage of GDP than the $800 billion stimulus approved in the United States, "has helped maintain the good momentum of China's economic development in the past 30 years and it has helped us avoid major fluctuations in the process of China's modernization because of a severe external shock."

China reported that last year it recorded an 8.7 percent GDP growth, defying global economic trends. That was largely achieved using a 4 trillion yuan ($586 billion) stimulus plan that was allocated to boost government spending, create jobs and boost domestic demand.

Chinese planners hope to sustain the fast growth rate while containing the dangers of inflation and the bubbles in stock market and real estate sectors. China's economy has boomed in recent years, but the expansion has been uneven.

"That is why we have formulated the task of skillfully managing the relations between maintaining steady and relatively fast economic development, structural adjustment and managing inflation expectations," Wen said. "This is at the core of China's macroeconomic control."

Despite the financial crisis in the United States, Wen said he has not lost faith in the economic management of the world's largest economy.

"As far as I'm concerned, the biggest lesson that I have drawn from the financial crisis is that, in managing the affairs of a country, it's important to pay close attention to addressing the structural problems in the economy."

In his speeches, Wen has said that one of China's goals into grow a strong and creative nation. Asked if restrictions on the Internet and other freedoms of expression hinder that goal, Wen defended his country's stance.

"I believe freedom of speech is indispensable for any country ... I often say that we should not only let people have the freedom of speech. We, more importantly, must create conditions to let them criticize the work of the government," he said.

However, he added, "All these must be conducted within the range allowed by the constitution and the laws, So that the country will have a normal order. And that is all the more necessary for such a large country as China, with 1.3 billion people."

Another issue between China and the United States has been China's exchange rate for its currency, the yuan.

President Barack Obama has said, along with other leaders, that China's currency is undervalued, resulting in a trade advantage for Chinese goods over American goods that contributes to the U.S. trade deficit.

Wen said that the perception that the yuan is undervalued is because Americans, especially those in Congress, "do not fully know about China."

"They are politicizing the problems in China-U.S. relations -- in particular, the trade imbalance between our two countries. I don't think this is the right thing to do," he said.

China does not pursue a trade surplus, Wen said.

The country's objective is to have balance with other countries, and an equilibrium in its balance of payments, he said.

"This is what we have been saying and doing," Wen said.

The trade surplus of a country is not necessarily linked to the exchange policy of that country, he said.