China's premier warns of further economic slowdown
BEIJING (AP) — China's economy faces "huge pressure" to slow further despite stimulus measures, Premier Wen Jiabao said Sunday, damping hopes for a quick recovery from the deepest slump since the 2008 global financial crisis.
Companies and investors are closely watching the world's second-largest economy for signs of a further slowdown which could have global repercussions by hurting Chinese demand for goods from the United States, Europe and other struggling economies.
"The economy is running at a generally stable pace, but there is still huge pressure for it to go downward," the official Xinhua News Agency paraphrased Wen, the country's top economic official, as saying during a weekend visit to eastern China.
The government has cut interest rates twice in a month, reduced gasoline prices and promised more spending on low-cost housing and other public works to revive growth that fell to a nearly three-year low of 8.1 percent in the first quarter.
Despite that, forecasters expect data due out this week to show that growth fell as low as 7.3 percent in the second quarter.
The slowdown raises the risk of job losses and unrest at a politically awkward time for the ruling Communist Party. It is trying to enforce calm ahead of a once-a-decade handover of power to younger leaders.
In his weekend remarks, Wen said government measures to boost economic growth were showing results, Xinhua reported. "The economic slowdown is tending toward stability," Xinhua paraphrased him as saying.
The government is trying to reduce reliance on exports and investments to drive growth by boosting domestic consumption. Wen said that is Beijing's "fundamental standpoint" to improve the economy.
He said the government also is trying to diversify and promote stable export growth. The government has set a 10 percent growth target this year for trade, which the Commerce Ministry has said is achievable, barring unexpected setbacks in Europe or elsewhere.
Wen promised to "fine-tune economic policies," according to Xinhua, but no details or new initiatives were reported. He said the government will press ahead with changes in the tax system that should reduce the burden on many taxpayers, but gave no timetable.
On the same visit, Wen also vowed that the recent interest rate cut aimed at stimulating economic growth will not ignite a new bout of real estate speculation that would push up housing costs, state media said.
Wen ordered local officials on Saturday to enforce rules aimed at cooling a surge in housing prices and called for those who tried to evade curbs to be punished, Xinhua reported.
Wen also called for faster construction of affordable housing, saying that local authorities should facilitate the approval of land and improve the quality of construction by inviting all types of investors to participate in projects, Xinhua said.
Wen said regulation of the housing market is still at a "critical moment" and described the task as "tough," it said. The measures to control the market include limits on home purchases and high down payments to qualify for mortgages.
The controls have helped push prices slightly lower over the past year but they remain near record-high levels. A nine-month decline ended in June, when the average home price in 100 major cities rose 0.05 percent from a month earlier, Xinhua reported, citing data from the China Index Academy.
Surging housing costs have fueled political tensions. The rise in real estate prices was driven in part by a large amount of government stimulus spending and bank lending pumped into the economy after the 2008 crisis.
On Thursday, China's central bank cut the interest rate on one-year loans by 0.31 percentage points to 6 percent. It said banks will be allowed to offer discounts to borrowers of up to 30 percent below that benchmark, an increase from the 20 percent discount previously allowed.
In an unusual step, the central bank also called on banks to control mortgage lending. That suggested authorities are worried about a possible resurgence in real estate speculation as they try to stimulate industrial activity and job creation.
Associated Press writer Joe McDonald contributed to this report.