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China to stress economic adjustments in 2010

business Updated: Nov 14, 2009 10:44 IST

Reuters
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China sent another signal on Saturday that it will turn its attention to the quality of growth in 2010 now that massive fiscal and monetary stimulus has cemented recovery in the world's third-largest economy.

"While we work to maintain economic growth, carrying out structural adjustments to the economy is becoming the more urgent task," Li Yizhong, minister of industry and information technology, told a conference.

The consistent message from Beijing in recent months is that China has to find new drivers of growth because it cannot count on a resumption of the vigorous U.S. consumer demand that generated turbo-charged exports from 2003-2007.

Yang Weimin, deputy secretary-general of the National Development and Reform Commission, the main planning agency, explicitly told the forum that China should lower its sights for GDP growth in future because global demand would remain subdued.

The World Bank has estimated that China's trend growth could fall to 8 percent a year from 10 percent.

Like Yi, Yang said the pressure on China to focus on economic restructuring was growing.

Among the sort of adjustments Beijing has in mind, economists expect continued efforts to promote consumption by boosting rural incomes and strengthening the social safety net.

President Hu Jintao said in Singapore on Friday that the thrust of Beijing's 4 trillion yuan ($586 billion) stimulus package was to expand domestic demand and create a new pattern of economic growth.

The government has also pledged to allow more private capital into state-dominated sectors of the economy and to make it easier for cash-starved smaller firms, which create 75 percent of all jobs in China, to borrow from banks.

"During the V-shaped economic rebound, restructuring is still a major challenge," Zhu Min, recently appointed as a deputy central bank governor, said on Friday. "We will focus on the structure and quality of growth next year."

Reducing overcapacity in industries ranging from steel to cement is also an integral part of the rebalancing agenda.

The Ministry of Environmental Protection said on Friday that it would launch a two-year clampdown on investment projects that flouted environmental rules, as part of efforts to curb wasteful investment.

China can afford to focus more on such deep-seated problems now that the economy has pulled out of a steep dive brought on by the global recession.

Li, the industry minister, said industrial production in November and December would grow about 16 percent from year-earlier levels, sustaining last month's momentum.

Factory output growth in the year to October accelerated to a 19-month high of 16.1 percent from 13.9 percent in the 12 months to September, the government reported on Wednesday.

For all of 2009, Li said industrial growth would be about 10.5 percent, quickening from 9.4 percent in the first 10 months of the year.