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China must embrace slower growth and bolder political reform to keep its economy from faltering and to spread wealth more evenly, Premier Wen Jiabao said on Wednesday, vowing to use his last year in power to attack mounting discontent that he warned could end in chaos.

Wen pledged to make growth more resilient to external pressures, deflate domestic property and inflation risks and deal with 10.7 trillion yuan ($1.7 trillion) in debt racked up by local governments, while also promoting political change.

"Reform has reached a critical stage. Without the success of political reform, economic reforms cannot be carried out. The results that we have achieved may be lost," the 69-year old Wen told reporters at the end of China's annual meeting of parliament, the National People's Congress (NPC), over which he has presided for a decade.

Wen has stood out among China's leaders as the most vocal advocate of measured relaxation under party control. As he prepares to leave power, he has made a habit of calling more forcefully -- though vaguely -- for political reform.

He retires next year along with President Hu Jintao after a decade in power which has seen China grow to become the world's second-biggest economy, but which is likely to see 2012 deliver the slowest rate of annual growth during their leadership.

Wen, who was once an aide to purged reformist party chief Zhao Ziyang, also gave an unusually blunt prognosis about the risks to growth and stability posed by China's political system, even warning that failure to act could rekindle the chaos of Mao Zedong's Cultural Revolution.

"A historical tragedy like the Cultural Revolution could occur again," he said. "Each party member and cadre should feel a sense of urgency."

During Mao Zedong's era of fervent Communism, Wen's father and grandfather, both teachers, were among the victims of party campaigns to demote citizens deemed to have bad "class" backgrounds or suspect pasts.

Wen opened the annual parliamentary session over a week ago by announcing a cut to China's economic growth target to 7.5 percent for 2012 from the 8 percent eyed in each of the previous eight years, saying it necessary to help transform the economy.

"Due to the European debt crisis and a shrinking external market, there are downward pressures on the Chinese economy. Under such circumstances, we lowered the growth rate target mainly to allow for structural adjustment," Wen said.

"We will step-up exchange rate reforms," he promised, adding that recent activity in Hong Kong currency derivatives markets signalled the value of the yuan "is possibly near an equilibrium level".

China de-pegged the yuan from the dollar in a landmark move in July 2005 and it has since appreciated some 30 percent against the U.S. currency, though some critics in the West say Beijing still keeps too tight a grip on the yuan to make exports cheaper.

NEW REFORMS MAY HAVE TO WAIT

Over a three-hour press conference, Wen flagged that he does not want to be a lame duck in his last 12 months as premier, spelling out a package of goals to addressing yawning income disparities and public dismay over soaring housing prices.

Social harmony is an obsession of the Communist Party leadership, which justifies its one-party grip on power with the promise of stability and prosperity for the country's 1.3 billion people, most of whom are very poor.

China's economic ascent has increasingly concentrated riches in the hands of an urban elite, despite Wen's pledge to improve the livelihoods of poor farmers and rural migrants to cities.

"Economic development has also produced unfair distribution, a lack of trust, graft and other problems," Wen said.

"I'm deeply aware that solving these problems needs the advance of political system reform, as well as economic system reform, and especially reform of the leadership system of the party and state."

However, many analysts said it seemed unlikely that any major reforms would be delivered ahead of a leadership handover, which is scheduled to begin towards the end of this year when Hu and Wen retire from their posts in the Communist Party.

"I do not expect deep reforms in a transition year," said Zhang Zhiwei, chief China economist with Nomura in Hong Kong.

"Structural reforms take multiple years to finish so it makes sense for the new leaders to push them," he told Reuters.

There is already a long to-do list of reforms in the 12th five year plan, laid out by Wen last year and approved by the NPC, which sets China's overall policy direction for 2011-2015.

The leadership of Hu and Wen has been criticised for failing to pursue reform vigorously enough to underpin long-term growth and wealth creation, falling short of efforts that have lifted 600 million people out of poverty in the three decades since Deng Xiaoping's landmark opening up programme began in 1978.

CREATING ROOM FOR REFORM

Lower growth will help Beijing keep inflation under control, while allowing it to stick to a broadly expansionary monetary policy to ensure a flow of credit to the small and medium-sized firms the government wants to encourage.

Inflation hit a three-year high of 6.5 percent in July and was above the government's 4 percent target in every month of 2011. Wen has maintained the target for this year.

Wen said home prices, which have started to decline after soaring 10-fold in the last decade, remained "far from returning to reasonable levels".

Government efforts to curb real estate speculation must be maintained or risk chaos and a property bubble which would harm the economy if it burst, he said.

Softer property prices have stopped local authorities from selling land to raise money needed to service debts. Economists believe that some 20 to 30 percent of those loans may to turn sour, which could cripple the banking system.

But Wen said the debt risks were manageable.

Wen's tough talk on property helped send Chinese shares lower, with Shanghai's benchmark stock index ending down 2.6 percent and Hong Kong slipping 0.2 percent as investors rapidly reversed recent speculation that Beijing was preparing to ease measures in the property sector.

Property is crucial to China's economy. Real estate investment generates about 13 percent of economic output and the country's vast factory sector is battling with a downturn in external demand from debt-ridden Europe and under-spending U.S. consumers, China's two biggest export markets.

China revealed at the weekend that its trade balance plunged $31.5 billion into the red in February -- the largest deficit in at least a decade.

The trade data followed other reports on Friday showing softer rates of growth in inflation, bank lending, retail sales and industrial output, pointing to a gradual slowing of the economy but not a hard landing.

 

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Japan announced on Tuesday that it has won Chinese authorities' approval to buy 65 billion yuan ($10.3 billion) in Chinese government bonds.

The move will help Japan diversify its reserves away from the dollar and strengthen ties between the two largest creditor countries in the world.

The timing of the purchases has not been set yet. A few months of preparation will be needed for the completion of technical procedures before the Chinese bonds can be bought, Jun Azumi, Japanese finance minister, told a news conference in Tokyo, according to Xinhua News Agency.

"We will consider trends in the financial markets to decide on a right time for the purchases," Azumi said.

He also suggested the initial purchases would be in small amounts and take into account conditions in Japan's foreign-currency assets.

"We think this ($10.3 billion) is an appropriate amount when you consider our common goal of strengthening economic cooperation between Japan and China," Azumi told reporters.

In December, the two countries agreed at a summit to promote trade in the yen and the yuan, as well as to invest in each other's bond markets.

Japan's announcement on Tuesday marks the first time it has given public information about the quota for purchasing Chinese government bonds.

The announcement also came after Chinese central bank officials said on Monday that China and Japan have "great potential" to work together in the fixed income market.

Yi Gang, vice-governor of the People's Bank of China and head of the State Administration of Foreign Exchange, said Japanese investors are welcome to invest in the Chinese bond market and that China would continue to buy Japanese government debt.

"But a decision to increase the investments would be made after considering mutual benefits, and yen purchases would be reduced if Japanese concerns arose over the yen's appreciation," Yi said.

Among all countries, China and Japan hold the largest foreign-exchange reserves and are also the top purchasers of US Treasury bonds. Moreover, both are looking to reduce their exposure to dollar assets at a time that the US economy is wobbling.

Japan's purchase quota for Chinese government bonds is equal to only 0.7 percent of Japan's $1.3 trillion in foreign reserves. The country's dollar assets, in comparison, make up more than 70 percent of that portfolio.

Xu Wei, a researcher with the China Center for International Economic Exchanges, said the plan to buy yuan is only a beginning. In the long run, both countries are likely to try to move away from US dollars and to work more closely with each other, he said.

"Considering the deepening debt crisis in Europe and the weak recovery of the US, investing in China's government bonds would be a smart step for the Japanese government to take," Xu said.

"It could help solidify confidence in the Asian market and thereby benefit the global recovery," Xu said.

Meanwhile, Japan's plan to buy Chinese government bonds has helped ease appreciation pressures on the Japanese currency while the country recovers from the earthquake and tsunami that struck it a year ago, she said.

Xu also considers Japan's purchasing plans as a sign of progress toward China's goal of making the yuan an international reserve currency. He said Japan's example may prompt other countries to follow it.

Earlier in January, South Korea also said that it might invest part of its $300 billion in foreign-exchange reserves in yuan-denominated assets.

According to statistics, the average yield on investment in five-year US Treasury bonds was 1.41 percent last year, while the average return on Chinese government bonds with the same maturity was 3.52 percent.

 

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China attracted 7.73 billion U.S. dollars in foreign direct investment (FDI) in February, down 0.9 percent year-on-year, the Ministry of Commerce (MOC) said Thursday.

It marks the fourth consecutive month of drops in FDI in the wake of a lingering global economic recovery, MOC data shows.

FDI fell 0.3 percent year-on-year in January, 12.73 percent in December, and 9.76 percent in November.

The February figure brought the total FDI in the first two months to 17.72 billion U.S. dollars, down 0.56 percent from the previous year, MOC spokesman Shen Danyang said at a regular press conference.

In the first two months, the nation approved the establishment of 3,005 foreign-invested companies, down 11.59 percent year-on-year. The month of February alone registered 1,603 new foreign-invested companies, Shen said.

Shen said that FDI in the country's agriculture, forestry, animal husbandry and fishery sectors rose rapidly over the January-February period, together up by 38.2 percent year-on-year to 312 million U.S. dollars.

Meanwhile, both manufacturing and service sectors saw FDI drop. The manufacturing industry used 8.36 billion U.S. dollars of FDI, down 0.1 percent, while FDI in the service sector dropped 3.51 percent to 8 billion U.S. dollars.

Investment from the United States and other Asian countries and regions increased during the period, while that from the EU fell, Shen noted.

U.S. businesses invested 525 million U.S. dollars in China, an increase of 0.87 percent year-on-year, while investment from 27 EU member countries dropped 33.32 percent to 906 million U.S. dollars.

Both eastern and western regions registered negative FDI growth in the first two months, down by 1.63 percent and 6.55 percent, respectively, Shen said.

But the FDI going to the country's central regions rose 19.21 percent to 1.43 billion U.S. dollars during the period.

Furthermore, the country's overseas investment in non-financial sectors jumped 41.1 percent year-on-year to 7.44 billion U.S. dollars in the two months, Shen said.

But Shen failed to give details of these investments as the MOC is still studying the data.

Shen said the amount of investments calculated involved 706 overseas companies based in 97 countries and regions.

Business volume in overseas-contracted projects rose 16.6 percent year-on-year to 11.5 billion U.S. dollars. But the value of new contracts signed over the January-February period fell 18.5 percent to 14.48 billion U.S. dollars.

Fifty-six thousand more Chinese were sent to work in investment projects abroad during the period, Shen said.

As of the end of February, 799,000 Chinese were working in investment projects abroad, up by 35,000 from last year.

 

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Premier Wen Jiabao said on Wednesday that China will intensify its currency regime reform and the foreign exchange rate has possibly reached "equilibrium", a signal that there is little room for the renminbi to appreciate soon.

"In the Hong Kong market, the non-deliverable forwards (a type of futures contract) have started to fluctuate in both directions. And this tells us that the exchange rate of the renminbi has possibly reached equilibrium," Premier Wen Jiabao said at a news conference at the end of the National People's Congress session.

"China will go on intensifying foreign exchange reform, especially to allow relatively wider, two-way fluctuation."

The yuan has gained 30 percent in real terms since 2005. But it dropped by 0.7 percent against the dollar this year after surging by 4.7 percent in 2011, while China's exports have been hurt by the slackened global demand, especially because of the European debt crisis.

In February, China's imports gained by 39.6 percent from a year earlier, and exports grew by 18.4 percent, causing a $31.5 billion trade deficit in February, the biggest since 1990. Experts said this will slow the pace of gains in the Chinese currency in the coming months.

"The premier's remark on equilibrium means China will not allow its currency to rise by much in the short term, or say this year," said Li Wei, an economist at Standard Chartered Shanghai.

"And it also shows the nation is not optimistic about China's economy and the exports dragged down by the European debt crisis," he added.

In the annual Government Work Report last week, Wen cut China's expected economic growth rate this year to 7.5 percent.

"China aims for quality growth in the economy, and we want to solve the problem that China's economy is unbalanced, uncoordinated, and unsustainable," Wen said.

Some countries, including the United States, have been pressuring China to allow its currency to rise further, saying its trade surplus demonstrates the need.

But Wen said China's foreign trade is "basically balanced", and the surplus dropped to 2.8 percent of the gross domestic product last year.

During this year's NPC and CPPCC sessions, People's Bank of China Governor Zhou Xiaochuan said China may "appropriately" widen the yuan's trading band.

"Premier Wen's remarks that China will continue to push for relatively big-scale and two-way fluctuation in the currency is excellent because it takes us a lot closer to the point that the renminbi can be freely traded," said Simon Derrick, head of currency strategy at BNY Mellon, an investment management and services company in New York.

Stephen Gallo, head of market analysis at financial service provider Schneider Foreign Exchange in London, agreed.

"Overall, the recent fluctuations in renminbi are more important from a structural rather than a cyclical perspective - in other words, China's words and its deeds certainly suggest that the case for a more flexible yuan is gaining traction on the part of policymakers," Gallo said.

The best way to solve the "difficulties and frictions caused by the trade imbalance between China and the US is to cooperate", Wen said.

Wen's remarks come at a time that trade and economic tensions between China and the US have been intensifying for several months, in which time the US lodged an appeal about China's rare earths exports policies with the global trade arbitrator and established an interagency trade enforcement unit to see whether nations, including China, play by the rules.

On Tuesday, the US brought up a case before the World Trade Organization about China export restrictions on rare earths, 17 rare elements used in a number of high-tech items ranging from wind turbines to missiles.

Japan and the European Union joined the US in challenging China's export policy.

Wen didn't mention the rare earths case during the news conference, but he called for cooperation between China and the US. "Cooperation would lead to healthy and sustainable growth for both economies," he said.

China and the US should promote "bilateral trade and two-way investment", enhancing cooperation in new energy, new materials, environmental protection, aviation and other high-tech fields, Wen said.

 

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China's major steel producers have seen further losses in January, according to statistics from the China Iron and Steel Association (CISA), and analysts said yesterday that the losing streak is expected to continue throughout the year.

The country's 80 largest steel producers reported combined losses of 2.32 billion yuan ($366.80 million) in January, compared with a net profit of 7.91 billion yuan in the same period last year, China Business News reported yesterday, citing statistics from the CISA.

"Steel producers have been making losses since October, mainly because of the sluggish domestic demand and severe overcapacity in the sector," Jia Liangqun, chief analyst at industry information portal mysteel.com, told the Global Times yesterday.

In October, domestic steel prices dropped more than 700 yuan per ton compared with a month earlier, and have remained at around the same level since then, according to Wang Guoqing, an industry analyst with Beijing Lange Steel Information Research Center.

"But iron ore prices have remained stable over the same period, which has created a great burden for domestic steel producers," Wang noted.

In 2011, China produced some 850 million tons of steel, but the domestic market can only consume about 73 percent of the total output, according to statistics from the China Federation of Logistics and Purchasing.

It is also unlikely that the sector can export its way out of losses. In January, China exported some 3.73 million tons of crude steel, up 19.9 percent year-on-year. But Jia noted that Chinese steel products do not enjoy enough of a price advantage to make more headway in the overseas market.

Experts said that the sector is likely to see an upturn in the coming months, given that real estate construction is expected to pick up in spring.

But Jia of mysteel.com said that the temporary improvement is not likely to save the sector from further losses.

"Given the overcapacity in the sector, the only way for steel producers to cut losses is to cut production," he said.

 

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US President Barack Obama announced on Tuesday that the United States, joined by Japan and the European Union, has filed complaints with the World Trade Organization over China's rare earth export quotas.

He said this as an effort to give "American workers and American businesses a fair shot in the global economy".

His words, however, imply that he does not really care about the environmental degradation caused by China's disorderly and excessive mining of rare earth materials, as long as US workers and businesses can profit from China's cheap supply.

This is shocking for a president who likes to portray himself as pro-environment when he fights Republican presidential candidates over clean energy issues, or when he tried to restore the US' leadership role at the UN Climate Change Conference, in Copenhagen, in December 2009.

China's new regulations on rare earth manufacturing and exports, which were introduced a few years ago, are based on the sound rationale of sustainable growth and environmental protection.

With only a third of the world's rare earth deposits, China now produces over 90 percent of the global rare earth minerals, a group of 17 elements that are widely used in high-tech products such as solar panels, batteries for electric cars and cell phones.

The lack of strong regulations in the past has posed grave dangers to the country and its people by depleting natural resources and destroying the environment. For example, rare earth mining has polluted drinking water in regions along some waterways linked to rare earth mines.

Experts believe it will cost tens of billions of dollars to repair the ecosystems damaged by rampant rare earth mining over the past decades. And American, Japanese and European businesses are unlikely to foot the bill.

On the other hand, countries such as the US, Canada and Australia, which used to produce rare earth minerals, stopped such manufacturing a decade ago due to the environmental concerns and the higher cost compared with Chinese exports.

When talking about China's purchase of raw materials from Africa and Latin America, many people in the US and Europe like to use the word "grabbing resources" or even "colonialism", but none of these people use similar words to describe the West's exploitation of China's cheap rare earth minerals.

This is just hypocrisy.

According to the US Geological Survey, there are about 13 million metric tons of rare earth deposits in the US. Instead of buying from China, Obama should propose tapping the US' own deposits. Such a move would not only enable the US to share the responsibility for the supply of rare earth materials, it would also create jobs for Americans, the single most powerful weapon Obama needs to beat a Republican candidate in November's election.

In filing the WTO case, Obama has to convince people why China should deplete its resources and disregard environmental and public health concerns, issues that are addressed prominently both in China's 12th Five-Year Plan (2011-15) and the recent World Report on China.

A win for the US, Japan and the EU in the WTO case would be a loss for the global environmental cause.

 

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Standard Bank Group Ltd, Africa's biggest lender by assets, said on Thursday that China and Africa will experience a "honeymoon" period during the next 10 years in terms of investment, and their areas of cooperation will be extended.

"From my perspective I see Sino-African cooperation moving beyond political expediency to a point where it will be driven by 'Africa needing China and China needing Africa' - a good basis on which to build trust and expand cooperation," said Craig Bond, chief executive of the bank's operations in China.

Bond said that Africa needs China to help fund and refresh its ailing infrastructure, while in turn, China needs Africa for its abundant natural resources. China also has a vested interest in seeing Africa prosper and improve the quality of life, opportunities and wealth of its people, as the continent's growing middle class offers a huge future market for Chinese manufactured goods, according to Bond.

"China is clearly committed to significant investment in Africa and understands the important role it must play in refreshing and funding pan-African infrastructure in exchange for access to its mineral resources and new markets," he said.

Trade between China and Africa reached $160 billion in 2011, an increase of 28 percent from the previous year, while African exports to China increased by one-third during the same period, up from $67 billion in 2010 to $93 billion.

Jeremy Stevens, economist at Standard Bank, said that although China's economic growth is expected to slow in the next 20 years and the growth of the country's demand for commodities will shrink in the long run, in absolute terms China's appetite for resources remains huge.

Bond said that over many years of continued investment into local mining, oil and gas, power and infrastructure sectors, he has noticed very real investor interest in Africa's agricultural, manufacturing and commercial property sectors.

"We see a number of large and junior mining and resources companies looking for Chinese investment at present, but equally we see a large number of African contracting and infrastructure-related companies and projects looking for Chinese investment, involvement and funding."

Chinese investors have demonstrated an increasing interest in African sectors such as manufacturing, agriculture, transport and logistics, and the next 18 months will see Chinese investment in these sectors grow significantly, he said.

The South Africa-based bank said that this year it will strengthen strategic cooperation with Industrial and Commercial Bank of China Ltd, the world's largest lender by market value, with a particular focus on Africa. ICBC holds a 20 percent stake in Standard Bank.

Last year, the two sides moved beyond mergers and acquisitions and debt advisory transactions, to supporting the full banking needs of Chinese investors in Africa, and launched a Sino-African cash-management system, which was piloted with five major Chinese companies.

Shen Lei, deputy general manager of transactional products and services of Standard Advisory (China) Ltd, a subsidiary of Standard Bank in Beijing, said that this year the bank will establish a Chinese team to provide financial services in 17 African countries and better cater to the demands of Chinese investors throughout all phases of transactions.

Good professional advisers, good project and investment due diligence, an understanding of the social and political environment and the sourcing of reputable local partners are recommended by Standard Bank as key elements for conducting business in Africa successfully.

In terms of bidding for M&A transactions in the open market, Chinese companies come out worse than their Western competitors, said Bond.

"Chinese investors are, as a rule, very wary of overpaying for assets and so they often apply very conservative valuations, based on their own domestic Chinese M&A experience, which can result in them underbidding in the competitive process," he said.

"In terms of competitive bids for large African infrastructure projects, our experience is that large Chinese contractors are usually extremely competitive and apart from the lowest-cost bid, they often come with well-priced funding from the Chinese banking system and so are becoming regular winners in these processes," Bond said.

 

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US President Barack Obama announced on Tuesday that the United States, joined by Japan and the European Union, has filed complaints with the World Trade Organization over China's rare earth export quotas.

He said this as an effort to give "American workers and American businesses a fair shot in the global economy".

His words, however, imply that he does not really care about the environmental degradation caused by China's disorderly and excessive mining of rare earth materials, as long as US workers and businesses can profit from China's cheap supply.

This is shocking for a president who likes to portray himself as pro-environment when he fights Republican presidential candidates over clean energy issues, or when he tried to restore the US' leadership role at the UN Climate Change Conference, in Copenhagen, in December 2009.

China's new regulations on rare earth manufacturing and exports, which were introduced a few years ago, are based on the sound rationale of sustainable growth and environmental protection.

With only a third of the world's rare earth deposits, China now produces over 90 percent of the global rare earth minerals, a group of 17 elements that are widely used in high-tech products such as solar panels, batteries for electric cars and cell phones.

The lack of strong regulations in the past has posed grave dangers to the country and its people by depleting natural resources and destroying the environment. For example, rare earth mining has polluted drinking water in regions along some waterways linked to rare earth mines.

Experts believe it will cost tens of billions of dollars to repair the ecosystems damaged by rampant rare earth mining over the past decades. And American, Japanese and European businesses are unlikely to foot the bill.

On the other hand, countries such as the US, Canada and Australia, which used to produce rare earth minerals, stopped such manufacturing a decade ago due to the environmental concerns and the higher cost compared with Chinese exports.

When talking about China's purchase of raw materials from Africa and Latin America, many people in the US and Europe like to use the word "grabbing resources" or even "colonialism", but none of these people use similar words to describe the West's exploitation of China's cheap rare earth minerals.

This is just hypocrisy.

According to the US Geological Survey, there are about 13 million metric tons of rare earth deposits in the US. Instead of buying from China, Obama should propose tapping the US' own deposits. Such a move would not only enable the US to share the responsibility for the supply of rare earth materials, it would also create jobs for Americans, the single most powerful weapon Obama needs to beat a Republican candidate in November's election.

In filing the WTO case, Obama has to convince people why China should deplete its resources and disregard environmental and public health concerns, issues that are addressed prominently both in China's 12th Five-Year Plan (2011-15) and the recent World Report on China.

A win for the US, Japan and the EU in the WTO case would be a loss for the global environmental cause.

I heard a businessman in an interview with the BBC the other day thats its all lies that the Chinese are raising the prices and restricting mining for enviromental concerns, because the price he has to pay for R.E's is lots lots lots more than what a domestic user is required to pay.

 

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China overtook the United States to become the top foreign investor in Germany in 2011 in terms of investment project numbers, according to statistics released by the Germany Trade & Invest (GTAI) agency on Thursday.

Chinese investment projects in Germany have totaled up to 158, ahead of the United States '110, Switzerland's 91 and France's 53, said a statement by GTAI, the economic development agency of the German government.

The foreign investment projects in Germany mainly concentrate in the mechanical engineering and automotive sectors, which account for 20 percent of the total, as most of them involved in the new production bases, in comparison with 13 percent being pumped into the sphere of new technologies, 6 percent into the field of renewable energy.

In a latest sign of the strong Chinese investment tide in Germany, automotive supplier Heibei Lingyun Industrial Group Corporation earlier this week agreed to buy Kiekert, a German maker of latch systems for cars.

Early this year, Chinese construction equipment manufacturer Sany Heavy Industry wound up a landmark acquisition of Putzmeister, a German engineering firm.

The deal has been deemed as one of the biggest investment projects in the mechanical manufacturing and engineering sector, the pillar industry of the German economy.

More than half of the total foreign investments in Germany still come from the European countries, according to the GTAI.

 

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How much monthly income do people need to feel secure?

Different respondents, of course, will give different answers based on where and how they live.

But the admission by Cui Yongyuan, a member of the National Committee of the Chinese People's Political Consultative Conference, that he feels he doesn't have enough, is symptomatic of a growing sense of economic anxiety among ordinary Chinese people in today's society.

"There is no problem with my current monthly income exceeding 10,000 yuan ($1,578), even more, but still, I often feel I cannot cover my daily needs," Cui, who is also a well-known anchor with the China Central Television (CCTV), recently revealed on a People's Daily website forum channel.

"I felt like a millionaire in 1986 when I just started working and I was paid about 80 yuan a month. At that time, I usually scrambled with colleagues to pay for meals."

As a popular CCTV anchor with a reasonable income, Cui's self-disclosed financial worries caused a stir on the Internet.

"If a person with a considerable income like yours suffers financial difficulties, what about people who earn less?" was a common response.

Another piece of news, spreading almost concurrently on the Internet, was that an employee in Beijing with a monthly income of 7,500 yuan has no sense of financial security. After tax and pension reductions and the necessary outlays on rent, food and transportation, the employee could save less than 2,500 yuan every month.

It is an indisputable fact that high prices and non-guaranteed social welfare are exacerbating the sense of anxiety that is spreading through all income groups.

Compared with China's annual per capita disposable income of 21,810 yuan in 2011, the incomes of Cui and the Beijing employee are undoubtedly much higher. So why do they still feel financially insecure?

"The main reason for the lack of a sense of economic security among ordinary people is that income growth has failed to match the pace of price rises," Cui said.

His words go to the heart of the problem.

According to the State Bureau of Statistics, China's per capita disposable income for urban residents grew 8.4 percent year-on-year in 2011, lower than the 9.2 percent GDP growth, and far lower than the 24.8 percent growth in the country's fiscal revenues.

The lower-than-GDP income growth has not only eroded the sense of dignity among middle-income groups, but also caused more people to identify themselves as disadvantaged. According to a survey conducted by the People's Tribune magazine affiliated to the People's Daily in late 2010, 45 percent of Party and government employees believe they are disadvantaged, and more than 50 percent of intellectuals and 60 percent of while-collar workers feel the same. The survey shows an expanding sense of inferiority, although it does not necessarily represent an objective picture.

Wealth depreciation is also weakening people's sense of financial security. Statistics show that China's consumer price index was 5.4 percent in 2011, much higher than the 3.5 percent one-year deposit interest rate. The 1.9 percent gap means that residents will have suffered a 1.9 percent economic loss if they kept their money in the bank. According to data from the central bank, by the end of 2011, residents had deposited 35.2 trillion yuan in financial institutions. If calculated at a minus 1.9 percent interest rate, their total wealth dwindled by 660 billion yuan, or 500 yuanon average.

Lin Daofan, a National People's Congress deputy from Guangdong province, recently conducted a survey at a vegetable market in Beijing on the purchasing power of 10 yuan, Lin found he could only buy three apples, five cucumbers or seven tomatoes.

Declining purchasing power in the context of inflation, along with the unendurably high prices for housing, education and healthcare, are making more and more people anxious about their financial security.

Besides individuals' own efforts to make more money, the government needs to reduce taxes and establish a more developed and all-inclusive social security network.