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, Premier Wen Jiabao says.
Wen said Chinese need to recognize the seriousness and complexity of the challenges the country faces. But he added that China’s economic fundamentals remain favorable, even if the economy hasn’t fully stabilized.
“At present, our country’s economic growth rate remains within the target range set earlier this year and we are seeing the effectiveness of stabilization policies,” Wen said during a tour of the southwestern city of Chengdu on Saturday. His remarks were posted Sunday 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 prioritize 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 urbanization 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 Friday that the world’s second-largest economy grew by 7.6 percent 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 percent, damping hopes that China can make up for U.S. and European weakness, but in line with the government’s official target of 7.5 percent 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.
Other indicators announced Friday suggested the low point of the recent decline might be past, especially strong June bank lending, which is closely tied to business activity.
June retail sales growth declined to 12.1 percent adjusted for price changes, down from the previous month’s 13.8 percent growth. Growth in factory output edged down to 9.5 percent from May’s 9.6 percent.
In a reflection of efforts to spur the economy with higher investment, growth in spending on factories, real estate and other fixed assets accelerated to 23.2 percent in June from the previous month’s 20.1 percent.