Wen says China still can meet growth target

Associated Press
In this photo taken on Aug. 11, 2012, laborers work at a furniture factory in Xianyou county in southeast China's Fujian province. China's premier said Wednesday, Aug. 15, 2012 the country should meet this year's economic targets but is warning hardship could continue for some time and trade conditions will be grim. (AP Photo) CHINA OUT
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In this photo taken on Aug. 11, 2012, laborers work at a furniture factory in Xianyou county in southeast China's Fujian province. China's premier said Wednesday, Aug. 15, 2012 the country should meet this year's economic targets but is warning hardship could continue for some time and trade conditions will be grim. (AP Photo) CHINA OUT

BEIJING (AP) — China's premier says the country should meet this year's economic targets but is warning hardship could continue for some time and trade conditions will be grim.

During a visit Wednesday to eastern China, Premier Wen Jiabao cited a small improvement in industrial output and said employment is stable, the official Xinhua News Agency said.

The report gave no direct indication whether Beijing might be considering more interest rate cuts or other stimulus measures to boost growth that slumped to a three-year low of 7.6 percent in the quarter ending in June. That is relatively robust compared with the United States, Europe and Japan but has hurt Chinese companies that depend on higher growth to drive sales.

"We have the conditions and capabilities, and will be sure to fulfill this year's economic and social development targets," Wen was quoted as saying.

However, he also "warned that the foundation for economic stabilization is still unstable, and that economic hardships may continue for some time."

The government has cut rates twice since the start of June and is pumping money into the economy through higher investment by state companies. Authorities are resisting calls for more aggressive action after their huge stimulus in response to the 2008 global crisis fueled inflation and a wasteful building boom.

The ruling Communist Party's growth target for the year is 7.5 percent. Private sector analysts expect full-year growth of about 8 percent.

The slowdown raises the risk of job losses and unrest at a time when the ruling party is trying to enforce calm ahead of a handover of power this year to younger leaders.

Analysts initially expected China's relatively robust economy to recover starting early this year but have pushed back that time frame following a drumbeat of bad news from Europe and the United States.

Export growth in July collapsed to 1 percent, well below already anemic forecasts of about 5 percent, and factory output and consumer spending weakened despite the stimulus efforts.

The slump is due in part to government efforts in 2010-11 to cool overheating and inflation with lending and investment curbs. Chinese leaders reversed course last year and eased some controls after global demand plunged but have kept in place controls on home purchases and investment to prevent overbuilding and a surge in housing costs.

Wen called on local authorities to "carry out work in line with new conditions and local realities," Xinhua said, without giving details.

The premier pointed to improvements in some areas where the plunge in sales has driven thousands of small exporters out of business.

Wen said industrial production in Guangdong and Zhejiang provinces in the southeast and Jiangsu, north of Shanghai, rose by 1.4, 1.9 and 0.7 percentage points in July compared with output in the first half.

The premier said the national economy created 8.12 million new urban jobs in the first seven months of the year, an increase of 390,000 from the same period of last year.

Wen warned company managers they "should be prepared for a relatively long period of grim foreign trade," according to Xinhua.

The government set a target of a 10 percent trade growth this year. Trade grew 9.2 percent in the first half of the year but the full-year target looks increasingly difficult to meet.