Premier Wen Jiabao said that China's efforts to stem inflation have worked and that the pace of consumer-price increases will slow, an assessment that contrasts with some economists advocating further steps.

"There is concern as to whether China can rein in inflation and sustain its rapid development -- my answer is an emphatic yes," Wen wrote in an opinion piece in the Financial Times newspaper. "China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked. The overall price level is within a controllable range and is expected to drop steadily."

China has paused for 11 weeks in raising interest rates, the longest gap since increases began in October, even as analysts predict inflation will surpass 6 percent for the first time since 2008 in coming months. Money-market rates fell and stocks rose after Wen's remarks, driving the country's benchmark stock index to its biggest weekly gain in almost eight months.

"Premier Wen's comments appear primarily targeted at calming inflation expectations, which continue to run high as successive tightening measures have been met with steady increases" in consumer prices, said Alistair Thornton, a Beijing-based economist with IHS Global Insight. "We still expect one more interest-rate hike."

David Fuller's view This is a confident and unaccustomed statement by Premier Wen Jiabao and raises some interesting questions, starting with why now, and what audience is he addressing? Is he under political pressure at home and are these comments mainly for domestic ears, or is it a launch pad for his European tour emphasising China's economic clout as the emerging superpower? Do they presage a change in monetary policy, shifting the emphasis from fighting inflation to stimulating growth, and was he intentionally targeting the stock market?

A number of western commentators have become increasing bearish of China in recent months, often overstating risks in my view. Since Premier Wen's comments first appeared in an article under his name published by the Financial Times today, I assume that they are primarily for a western audience, as he commences his European tour.

A confident China is taking its place on the diplomatic as well as the economic stage, as it should in my opinion. China's views are given weight by its economic success and the OECD needs China to invest in its economies. I would not be surprised if Premier Wen announces that China will invest in more Euroland debt during this visit.

If you have not already read Wen Jiabao's article in the Financial Times, I commend it to you. Here is one short paragraph:

A notable result of our response to the crisis is that China has maintained steady and fast growth. Between 2008 and 2010, China's gross domestic product grew at an annual rate of 9.6, 9.2 and 10.3 per cent respectively. The consumer prices index over the same period was 5.9, -0.7 and 3.3 per cent; 33.8m new urban jobs were created. China has maintained sound growth this year.

On reading the full article, I could not help thinking about the number of western political leaders and financial spokesmen who wish they had the financial resources to speak so ambitiously and confidently.

Returning to my own opening questions above, I do think Premier Wen's comments presage a change in China's monetary policy during the next few months, as RBC's Wendy Liu forecast in the interview which I posted on Tuesday. He would know more about China's food supplies than any western commentator and I have heard that food inflation has accounted for up to 70 percent of their CPI inflation.

If China's monetary policy is close to an incremental shift back in favour of growth, it is logical that he would now like to see a stronger stock market. Today's upward dynamic for the Shanghai A-Shares Index (weekly & daily) was even bigger than yesterday's. (See also yesterday's comments.)

Here is another recent article on China which may be of interest.