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This post was edited by vincent001 at 2012-1-4 14:59|
China has warned that its economy may struggle in the early months of this year due to "difficult" conditions but stressed that it is ready to fine-tune monetary policy to limit any fall-out.
By Philip AldrickThe commitment to shift policy to be more supportive of growth was made by Chinese Premier Wen Jiabao and helped buoy global markets, coming on the back of better-than-expected activity in China's manufacturing sector.
China has been trying to take the steam out of an overheated property market, by raising rates and tightening borrowing criteria, but there have been mounting concerns that growth is tailing off too fast – threatening the global recovery.
In comments published by the authorities yesterday, Mr Wen said the first three months of 2012 would be "relatively difficult" and that "the market is relatively cold – that's the core of current problems".
The slowdown in both Europe and the US has hit China, which is heavily dependant on exports. At the same time, Beijing is anxious to avoid reigniting inflation, which hit a three year high of 6.5pc in July but has since slowed to 4.2pc. "We face problems of weakening external demand and rising costs for companies," Mr Wen said. "We are now in a situation where pressure from an economic downturn and high prices both exist."
China's economy grew by an estimated 9pc in 2011 – slower than 2010, when annual growth was over 10pc, but more than the 7.5pc some economists reckon the world's second largest economy will manage in the first three months of this year.
To alleviate concerns caused by the worldwide slowdown triggered in Europe, Mr Wen added: "The central government has made it clear that a prudent monetary policy will be implemented, and we will make fine-tuning and modest adjustments at the appropriate time and under the right conditions."
However, he dashed any remaining hopes of a repeat of 2008's 4 trillion yuan (£400bn) stimulus package. "Expanding domestic demand has two sides. The focus is on consumption, although investment is also covered," he said. "We can't repeat the practices of excessive capacity building or blind expansion."
China's central bank has started to relax monetary policy by cutting the required reserve ratio and relaxing curbs on bank lending. Mr Wen said he would try to ensure sufficient financial support for growth in 2012, but stressed that the rebalancing from exports towards domestic consumption and investment would continue.
"Priority will be given to key projects and projects under construction and we will limit industries suffering from overcapacity, those that cause heavy pollution and are energy intensive," he said.
His comments came after the purchasing managers index of manufacturing for China beat estimates, avoiding contraction in December.