The following are some key points of Zheng Jingping's press conference

Forex Reserves

"In the past, when foreign investors made profits in China they often transferred the money to other countries, but now due to the improvement of the Chinese market they can make good profits here, so they often reinvest in China.

"The Chinese government does not intend to have a high level of forex reserves. On the contrary, the Chinese government has introduced policies to bring greater balance to foreign trade and made adjustments to capital flows, including the introduction of the qualified domestic institutional investor scheme.

"The intention of these policies is to tone down the growth of forex reserves.

"We also need help from other countries to allow us to import high-tech products from them. So I believe that these policies by the central government, if they are implemented effectively, will help bring about stable growth in forex reserves."

FOREIGN TRADE

"The Chinese government has the measures, the confidence and the ability to improve its trade by strengthening import and export management, especially by implementing trade-tax policies.

"Because of the unique feature of the processing industry accounting for more than half of foreign trade, it's hard to see balanced foreign trade in the short run, and it's even harder to see a trade deficit because of the high proportion of processing industry in our trade."

FDI

He said foreign direct investment has dipped because governments at all levels have been standardising environmental and land use standards. Domestic capital has been ample and many other countries have enhanced policies to attract FDI.

"Finally, in recent years inflows of FDI have been around $60 billion a year, so it's difficult to realise rapid growth based on such a high base figure.

"I think FDI growth in this year will maintain the level of last year.

"Because of the many years of FDI inflows, we need time to digest it to make good use of the investment. At the current stage, I think it's good to improve the balance of payments situation. We still welcome foreign investors to invest in China."

GROWTH

"As for overall economic performance for the whole year, our belief is that the overall situation is good, but growth is a little fast.

"The overall situation is good because industrial efficiency is increasing, financial revenue is up and profits are up. Also, the incomes of both urban and rural residents increased to some extent. Some of the bottlenecks in coal production and transport have been alleviated, and prices are growing moderately."

He said one reason for the fast growth is that this is the first year of the 11th five-year plan, so local governments are investing to boost their local economies.

"As I said, investment in fixed assets is rapid, boosting capacity, so we have ample supply. And as you can see, we have booming demand from various fields, so it's inevitable to have such rapid growth at this stage.

"Looking at economic growth in the second half, there are factors that would both slow and support the continuing strong growth of the economy."

The lagged impact of tightening measures and curbs on property speculation could slow the economy.

"And some exporters have also sped up their exports in advance of changes to the export tax rebate system.

"Another thing is that interest rates are a global phenomenon, and many economies have started to tighten policy, so that will have some impact.

"We should mainly rely on economic and legal measures, and use some administrative measures to guard against overly rapid growth. If we can use such combined measures, economic growth in the second half can be both rapid and stable."

INVESTMENT

"Overly rapid investment growth will lead to over-production capacity, which will create financial risks. Also, some of the projects are not good enough.

"Either they're redundant or their rate of return is too low.

"This kind of resource-intensive growth pattern is not scientific and has already aroused the attention of policy makers, who have begun to implement measures to deal with this problem.

"Investment in assets is excessive and there is an oversupply of loans. In the long run, those will cause inflation. So we need to pay close attention to price changes."

INFLATION

"Because the allocation of production factors is becoming more globalised, that reduces the cost of production. For example, a financial analyst working on Wall Street might earn $200,000 a year, but if we hire one in India, the salary might drop by half or more.

"High investment in fixed assets is another reason. So price rises in upstream products are difficult to pass on to consumers. And right now, efforts to improve environmental protection and set up a social security system are not enough. So the low cost of production is in part a result of ineffective policies.

"Another reason is that because of past investment in fixed assets, we now have an overcapacity problem. "The causes of low CPI growth are still there in the short run, so we do not expect a big rise in consumer prices in the rest of the year -- that would not be realistic. However, I do expect prices to rise eventually.

TIGHTENING TIMETABLE

"The central bank will wait for the relevant information to make their own decisions."

"These things, if you look at them, some of them are starting to show results, for example, the latest one was July 5. There's a time lag for those measures to have an impact on economic performance. So we need time to see their impact. But the figures for June show that the measures have already started to take effect. For example, loan growth was down in June."

LIQUIDITY

"Indeed, liquidity is quite high and credit issuing is quite fast, and these are quite pronounced problems in economic life at present. * "China will also address the liquidity problem stemming from excessive foreign exchange reserves by taking measures involving foreign exchange management and sterilisation."

YUAN

"The reform of the yuan's exchange rate mechanism has been successful. We can see it is now more flexible, with ups and downs against the dollar.

"With the Chinese economy more and more part of the global economy, the issue of the yuan's exchange rate is closely related to the global economy and international issues, so if there are any problems in China's financial system, that would affect the world's financial system. Investors in and outside of China are aware of that, and of the importance of these issues.

"An administered, one-off yuan appreciation or depreciation will never happen again. There will be no more surprises.

"People who want...to wager on a yuan appreciation and so on are doomed to fail."