BEIJING, Mar 5 China will do more to save energy and cut pollution in 2007 while striving

BEIJING, Mar 5 (Reuters) China will do more to save energy and cut pollution in 2007 while striving to keep its economy humming following four straight years of double-digit growth, Premier Wen Jiabao said today.

In his annual report to the National People's Congress, China's parliament, Wen reaffirmed that Beijing will actively explore ways to invest $1.07 trillion dollars in foreign currency reserves but offered no hints as to how it would do so.

The speech was light on politics and foreign policy.

But it underscored that Wen has made narrowing the chasm between China's bustling coastal cities and struggling inland villages a task that will define his administration's legacy.

''Protect social equity and justice, and let all the people together enjoy the fruits of reform and development,'' Wen said.

China will lift spending on its restless countryside by 15.3 percent to 391.7 billion yuan in 2007, aiming to improve rural schools, hospitals and incomes as it seeks to ease social imbalances, he said.

The need to shun growth for growth's sake and to make China's economy greener and leaner was a recurring theme in the speech.

Security was tight throughout central Beijing on Monday, with Tiananmen Square cleared and roads cordoned off as thousands of delegates converged on the Great Hall of the People to hear Wen's speech, which opened the two-week parliament session.

China managed to reduce the amount of energy it used per unit of output by just 1.23 per cent last year, well short of its 4 per cent goal, and could overtake the United States as the biggest emitter of greenhouse gases as early as 2009.

Wen said the government is working on the assumption that GDP will grow by about 8 percent this year, the same target it set last year, when GDP actually rose 10.7 per cent.

He acknowledged that this year's growth outcome might also be wide of the mark, but said the target has been set to signal the importance of increasing efficiency, saving energy, cutting pollution and avoiding the blind pursuit of growth.

STICKING WITH EXPORTS, STRESSING EQUALITY The overall tone of Wen's report suggests policy makers are more relaxed about the state of the economy than this time last year, when breakneck growth in credit and investment raised the spectre of supply gluts and a new crop of non-performing loans.

While the government will keep a tight grip on capital spending and bank lending, the risk of overheating has been successfully averted, Wen said.

He said the government, its tax revenues swelling thanks to strong growth, will cut its budget deficit this year to just 1.1 percent of GDP from 1.3 per cent in 2006 -- well below the original goal of a shortfall of 1.5 per cent.

Wen promised to spend more to raise lagging incomes in the countryside, which is home to more than 60 per cent of the 1.3 billion population.

In past years, protests and riots have flared across China's countryside as aggrieved farmers protested corrupt land grabs, lawless officials and stagnating incomes.

Among further steps Wen spelled out are expanding rural cooperative medical insurance intended to offer farmers basic healthcare, which is now beyond the reach of many.

A drive to abolish most school fees for rural children will spread nationwide, he said.

China is also determined to boost domestic consumption as part of a volley of measures to reduce its record trade surplus, which is sparking growing anger in Washington.

But the premier, speaking ahead of a visit to Beijing on Wednesday by US Treasury Secretary Henry Paulson, said China is not about to abandon the export-driven growth that has helped it become the world's fourth-largest economy.

''Promoting economic development and increasing employment through the expansion of foreign trade is a policy that we must pursue for a long time to come,'' Wen said.

REUTERS AKJ RN0858