Full Text: Premier Li Keqiang Meets the Press (5)

Xinhua News Agency: Since the beginning of last year, the banks' NPL ratio has been increasing and cases of financial risks of shadow banking have occurred from time to time. Soon many local governments will see their debt come due. As the downward pressure on China's economy grows, how do you see the growing financial risks?

Li Keqiang: I see financial risks are the focus of your questions. It's true that there have been individual cases of financial risks in China, but we are fully capable of forestalling systemic and regional financial risks. China's economy continues to operate within the proper range and there is a fairly high savings rate in China. Moreover, 70% of local government debts are in the form of investment which boasts quite good prospect for yielding returns. We are also regulating the local government financing vehicles to ensure that we will keep front doors open and block back doors. Chinese banks have a fairly high capital adequacy ratio and ample provisions. It's true that there are non-performing loans and the NPL ratio has risen somewhat. Still, the level is quite low internationally.

Let me make clear here: Individual cases of financial risks will be allowed. We encourage the practice of balancing one's book in a market-based way to guard against moral hazard and raise people's awareness of financial risks. This year, we will set up the deposit insurance system and continue to develop multi-tiered capital markets to lower corporate leverage ratio. All these efforts will help ensure that financial services can better serve the real economy.

TVBS: There have been certain developments in Taiwan last year which have affected the business cooperation between the two sides of the Taiwan Straits. As the mainland adjusts its economic structure and as mainland's economy slows down, business people from Taiwan operating on the mainland have also run into difficulties. My question is, what steps will the mainland take to boost the cross-Straits business cooperation and ensure that businesses and people from Taiwan can continue to have priority access to the mainland's development opportunities?

Li Keqiang: People on both sides of the Taiwan Straits belong to one big family. As long as we continue to adhere to the one-China principle and the 1992 Consensus, oppose Taiwan independence and uphold peaceful development of cross-Straits relations, we will be able to lay a more solid foundation for cross-Straits business cooperation and expand the room for such business ties. To boost the economic cooperation between the two sides, we need to get both wheels in motion. One wheel is to enhance institution building. For example, the follow-up consultations on ECFA should be advanced. The other wheel is to boost mutual opening-up. As far as the mainland is concerned, closer attention will be paid to the investment made by Taiwan business people on the mainland.

Here I would like to ask you to convey a message to all these people, which I believe will prove to be quite reassuring to them, that is the mainland will continue to protect the lawful rights and interests of Taiwan business people on the mainland and continue to pursue preferential policies towards them as appropriate. In terms of opening-up, we will give priority to Taiwan in terms of both depth and intensity of opening-up steps. We welcome people from Taiwan, including young people, to the mainland to do business. We also want to further enhance personnel interflow between the two sides so as to bring the hearts and minds of people across the Straits closer to each other.

KBS: In the last few months, China's CPI rise hovered at just about 1.5%, and in January this year, the figure was a mere 0.8%. So are we to conclude that China has entered deflation? And some people argue that China is exporting deflation and this has also affected the ROK. What is your response?

Li Keqiang: About deflation, there are multiple criteria in evaluating deflation. A major criterion is consecutive negative growth of overall consumer prices in a country. And when it comes to CPI in China, last January we had a positive growth and the figure for February further rebounded. So I don't think there is deflation in China.

Consumer prices in China have been quite low recently, but China is not exporting deflation. The truth is we have been on the receiving end of deflation. Let me give you one example. Last year, China bought some 310 million metric tons of crude oil and 930 million tons of iron ores on international markets. The physical volume has been on the rise, but the value contained has declined because of tumble in international commodity prices. And we are also prepared to cope with such a situation. What we hope to see is that there will be a quicker global economic recovery and the global economy will regain its momentum of robust growth. (mo