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Wen said the test is not targeted at any country, nor will it threaten any country, nor does it violate any international treaties.

He pledged China's continued commitment to pursuing a peaceful road to development.

"China always advocates for the peaceful utilization of outer space and we are always opposed to an arms race in outer space," Wen said, adding Beijing was repeating its calls for an international convention banning weapons in outer space.

The Chinese premier said that China's annual defense budget is much lower than those of some developed countries, and even less than other developing countries. He also said that China has a long borderline and sealine to protect.

Reserves: gradual diversification of assets

Meanwhile, Beijing's move to set up an investment arm to manage some of its huge foreign exchange reserves won't have an adverse impact on the US-dollar denominated assets China holds, Wen said.

Wen acknowledged that the question of how to manage China's colossal forex reserves is a big issue and also a difficult issue.

"The fact is that US-dollar assets account for the majority of China's forex reserves," Wen said. "China setting up an investment agency wouldn't adversely affect the dollar assets (in the reserves)."

The government is currently forming a new agency that economists expect will be charged with investing around US$200-400 billion of China's US$1.1 trillion worth of forex reserves in longer term assets.

Stock market: oversight is key

Discussing China's stock market, Premier Wen, a trained geologist, said that China has to improve supervision of the market and build an open, transparent, financial system. Two weeks ago, a 9-percent plunge in the Shanghai stock market triggered a global sell-off.

The government will improve the quality of publicly traded Chinese companies, institute an open, fair, and transparent market and augment oversight, the premier said.

"We also need to encourage and do a good job in the timely disclosure of information in the stock market," Wen said.

Most of the companies traded in China are government-owned, and economists say the market's performance has little connection to the overall health of the Chinese economy.

Economy faces some problems

Wen said that China has the conditions for maintaining the current momentum of steady and fast economic growth and that his government has full confidence in its task.

Over the past years, China's economy has maintained stable and rapid growth, but "it is not a time for complacency".

The Chinese economy still has some major problems, namely unstable, unbalanced, uncoordinated and unsustainable problems, Wen said.

The unstable matter is that China has an excessively high investment growth rate, excessively large extension of credit, excessive liquidity of the currency, and improper foreign trade and international payment, Wen said.

China has unbalanced development between urban and rural areas, between different regions, and between economic expansion and social progress, the premier said.

The primary, secondary, and tertiary industries are not coordinated, investment and consumption are not coordinated, and China's economic growth relies too much on investment and export, said the premier.

The unsustainable issue is that China has failed to address well the issues related to energy saving, emission reduction, and environmental protection, he said.

In order to achieve sustainable development, the premier said, China needs to boost domestic consumption, push forward reform and opening-up, remove institutional obstacles, encourage intellectual and technological innovation, and make more efforts to conserve energy and reduce emissions.

"The conditions are there, and the most important factor is that we can strive for a peaceful environment for a long period of time to concentrate our resources and energy on economic development," Wen said.

"To achieve the task, although it is very arduous, we have full confidence," Wen said.

China's economic growth rate reached 10.7 percent in 2006, the fourth year in a row that the country's GDP growth rate exceeded 10 percent while keeping the inflation rate at a low level.

Crucial year for cross-Straits relations

The year 2007 is crucial in safeguarding the peace and development of cross-Straits relations, said Wen Jiabao.

He restated that Beijing strongly opposes "de jure independence" of Taiwan and any other forms of secessionist activities.

"We keep a close eye on the secessionist attempts and activities. No one will be allowed to change the fact that Taiwan is an inalienable part of China's territory and that its legal status has been recognized internationally," said Wen.

Wen said the government will actively promote "Three Direct Links" across the Taiwan Straits and ensure the legal rights of Taiwan businesspeople in the mainland as the trade volume across the straits has amounted to US$100 billion.

Wen also urged the Taiwan authorities to facilitate the exchanges between mainland and Taiwan. "The mainland compatriots have long wished to visit Taiwan and they have prepared for a long time."

Both sides of the Taiwan Straits should aim for the launch of passenger charter flights at weekends and for more convenient freight charter flights ahead of overall direct links, he said.

He also said Beijing "hopes to realize the wish" of direct tourism across the straits "as soon as possible."

"Ice-melting" trip to Japan

Premier Wen said he hopes his visit to Japan next month would help melt the ice and overcome longstanding strains between the two neighbors.

"If Japanese Prime Minister Shinzo Abe's visit to China in October last year was an ice-breaking journey, I hope that my visit to Japan in April will be an ice-thawing one," Wen said.

The Chinese premier said he would discuss the establishment of strategic and mutually beneficial ties, economic cooperation, technical, educational and personnel exchanges with Abe.

Admitting that problems exist, the premier noted that there is a cornerstone for bilateral ties: the three documents jointly issued by the two neighbors that summed up the past and outlined the future.

He urged the two sides to stick to the spirit of the three documents and "take history as a mirror and look into the future."

"Both sides will also strive to promote scientific and educational exchanges and exchanges between the two peoples, especially between the youth and children," said Wen.

Socialist democracy

The essence of China's socialist democracy is to let the people be masters of the country and enable them to oversee and criticize the government, Premier Wen told reporters.

He said China will take into account its own conditions and build democracy in its own way.

Corrupt officials will be punished

The premier pledged to punish all corrupt officials.

"No matter what field is involved, no matter who is involved, no matter how high ranking he is, severe punishment will be handed out," vowed the premier.

He vowed to push forward the reform of the political structure, reducing the over concentration of powers and enhancing the supervision of the government by the people.

The premier also called for enhanced education of government officials and leaders. "We should let every official and leader know that the water can carry the boat, but it can also overturn it," said Wen.

Rights from the people

The premier started his conference by answering questions asked by netizens, stating that he had taken onboard suggestions and concerns from web users, focusing on social problems such as pediatric health care.

Wen said: "We must understand the single truth that all of a government's rights are given by the people. We should rely on the people, work for the people and try to be good servants."

Wen called for China to maintain adherence to its three-decade-old policy of reform and opening-up while moving forward towards becoming a prosperous, democratic, civilized, harmonious and modernized nation.

"We must hold a belief unswervingly that we can confidently help China become a prosperous, democratic, civilized, harmonious and modernized nation. We can hold this belief as long as we emancipate our mind, keep in touch with the times, and seek truth as long as we keep reforming and opening up, adhere to peaceful, scientific and harmonious development," he said.

"The staff members of the government don't have any power except working as good public servants for its people," the premier said.

Education equality

The Chinese government will unfailingly keep on promoting education equality, while working to alleviate the social concerns of under-privileged groups, especially farmers, said Wen.

The aim of reform and construction is to ensure the people's welfare by providing them with clothing, food, living and transportation.

Currently, the most important challenge in this field is to promote the education equality.

"We will actively implement the employment policy, narrow the income gap, and establish the social welfare system that benefits both the urban and rural residents," Wen said. 

Wen highlighted the government's initiatives to tackle social welfare issues, concentrating on building up institutional support, such as abolishing agricultural tax and shoring up the nine-year compulsory education.

Minimum subsistence allowance

In order to improve living conditions of its poorer citizens, China will pass legislation on minimum subsistence allowance, Premier Wen said.

Wen informed the assembled of a plan on urban and rural health care reform that could provide increased system guarantees.

"The speed of a fleet is not determined by the ship which travels the fastest, but the one that travels the slowest. If we improve the living conditions of those in difficulty, we improve the well-being of the whole society," he said.

To ensure all the people can live a happy life, "the key is to secure their democratic rights and to promote equality and justice," the premier said.