Stocks Slump Worldwide As Communist China Will Let Currency Appreciate Gradually

Stock indexes in the United States, Asia and Europe fell sharply as traders worried that the turmoil in Japan, the world’s third-largest economy, could slow down growth worldwide. Bond prices rallied and yields fell as investors turned to safe havens like the dollar and French, German and American bonds.

For investors, the questions were urgent but largely unanswerable: How significantly would production fall in Japan? Which companies were most at risk? How would a loss of nuclear power in Japan affect energy markets worldwide?

The benchmark index in Tokyo fell more than 11 percent, its lowest close in nearly two years and its largest two-day drop since 1987.  In the United States, indexes fell more than 2 percent in the morning but recovered somewhat in the afternoon. Stocks were helped by a statement by the Federal Reserve saying the economy was on “firmer footing” and that the labor market was “improving gradually.”more

Prime Minister Wen Jiabao, answering prescreened questions at an annual news conference, said Monday that Chinafaced daunting challenges of taming inflation and developing a more consumer-based economy, and that the government would allow the nation’s currency to appreciate but at a cautious pace in order to protect Chinese jobs and businesses.

Mr. Wen said China’s grass-roots elections should be expanded to higher levels of government, but stressed that change must occur “step by step,” under the control of the Communist Party.

On the delicate topic of the revolts and revolutions that have besieged authoritarian Arab governments in recent months, he said China’s record of speedy economic growth and fast-rising living standards made analogies with those countries “not right.”

Mr. Wen spoke as the National People’s Congress, in a vote whose results were preordained, approved the country’s new five-year development plan. Its strategy promises a surge in government spending on domestic security and social programs like medical insurance, but offers little in the way of legal, political or banking reform. One principal goal, the government has said, is to lessen economic dependence on factory exports and build up innovation and domestic consumption.

Mr. Wen described the war on inflation as the government’s top priority.more

 Short URL: http://www.newsnet14.net/?p=65712