Chinese PM says economic woes will continue

Slower expansion, however, remains within expectations: Wen Jiabao

China’s economic woes that have brought growth to a three-year low will continue for some time, but the slower expansion remains within expectations, said Premier Wen Jiabao.

Wen said Chinese need to recognise the seriousness and complexity of the challenges the country faces. But he added that China’s economic fundamentals remain favourable, even if the economy hasn’t fully stabilised.

“At present, our country’s economic growth rate remains within the target range set earlier this year and we are seeing the effectiveness of stabilisation policies,” Wen said during a tour of the southwestern city of Chengdu on Saturday.

His remarks were posted today on the central government’s official website. “However, we also need to soberly see that the current economy has not yet formed a stable recovery and the economic difficulties may continue for some time,” he said. The government will prioritise job creation and provide financial aid and tax breaks to companies suffering from slowing exports due to sinking overseas demand, Wen said. Private investment will be encouraged and the government will promote industrial upgrading and urbanisation to spur consumption, he said.

Wen, the country’s top economic official, has previously promised more bank lending and other aid to small businesses that generate most of China’s new jobs and wealth.

“All regions and departments need to proceed with even greater determination and courage,” Wen said.

His comments follow the government’s announcement on Friday that the world’s second-largest economy grew by 7.6 per cent in the three months ending in June over a year earlier. That was the lowest since the first quarter of 2009 during the depths of the global financial crisis.

Growth was down from the previous quarter’s 8.1 per cent, damping hopes that China can make up for US and European weakness, but in line with the government’s official target of 7.5 per cent for the year.

Private-sector forecasters say the economy may have bottomed out during the first two quarters and China still is likely to achieve its target for the year.

Export growth has fallen and consumer spending weakened despite stimulus measures including two interest rate cuts since the start of June.

The government also is pumping money into the economy through higher investment by state-owned industry and more spending on low-cost housing and other public works.

However, Beijing is moving cautiously after its 2008 stimulus pushed up inflation and spurred a wasteful building boom.  Authorities have said curbs imposed on building and home sales to cool surging housing prices will remain in place.