Chinese premier signals easing of economic throttle

Chinese Premier Wen Jiabao is seeking to rein in the economy after years of breakneck growth and lend a helping hand to hundreds of millions in the backward countryside.

In a work report to be delivered to the opening of the annual session of parliament today, Wen announces plans to boost aid to rural areas by cutting taxes and increasing subsidies for farmers.

Keen on closing a growing wealth gap that Beijing fears could lead to social unrest, Mr Wen outlined steps to help rural areas - home to an estimated 800 million people - that have lagged the wealthy cities and coastal regions.

"Solving the problems of agriculture, villages and farmers is one of the most crucial parts of our entire work," Wen said.

He also called for a resumption of talks with rival Taiwan under the "one-China" principle, a renewed peace overture analysts said the self-governed democratic island is likely to reject.

Reuters obtained excerpts of the speech marking Mr Wen's first year in office late yesterday.

In a broad speech outlining the goals for 2004, Mr Wen offers the first signs the country's new leadership may be ready to embrace political reform. He also renews a pledge to cut 200,000 military jobs from the world's largest army by the end of 2005.

The cautious report reflects the fact that Mr Wen's job is to chart the course of the world's sixth-biggest economy now in the global spotlight as it gobbles up resources and spits out cheap exports.

On currency reform - a key issue being watched by traders and politicians - Wen said virtually nothing.

Despite calls by the United States and others for a revaluation of the yuan, which is pegged to the US dollar, Wen said the currency would be kept "basically stable at a rational and balanced level" this year.

China's gross domestic product rose 9.1 per cent in 2003 from the year earlier amid booming factory output and exports.

Mr Wen said the 2004 growth target was seven per cent, and laid out a series of steps aimed at easing the economic throttle, such as a clamp on credit and cutting state stimulus spending.He is trying to shepherd the economy through troubles such as an ailing banking sector, inefficient state enterprises and a shaky legal system.

But one of Mr Wen's top priorities is the impoverished countryside and he pledged to lower agricultural taxes by one per centage point a year and scrap them entirely within five years.