Despite the increase in manufacturing and President Hu Jintao’s speech addressing the economy, Premier Wen Jiabao warned of a ‘difficult’ start in 2012. China’s economy grew 9% in 2011, which was slower than 2010 where the estimated growth was over 10%, and there are fears that the economy will slow further. The Telegraph reports:
Mr Wen also reiterated pledges to expand domestic demand as authorities try to ward off the effects of crises in the US and Europe – key markets for China’s export-dependent economy.
“The first quarter of the year may be quite difficult,” Mr Wen said, according to a statement by the State Council, China’s cabinet.
“We are now in a situation where pressure from an economic downturn and high prices both exist,” he said.
Mr Wen added that slowing external demand and the rising cost of doing business domestically further complicated the situation when compared with the financial crisis in 2008.
This warning comes amid last month’s claim by the government of guaranteed steady growth. Wen also said that monetary policy will be fine-tuned as needed. Bloomberg adds:
“We see downside pressure on our economy and elevated inflation at the same time,” Wen said during a trip over the past two days to Hunan province, according to a statement on the government’s website today. “We also face problems of weakening external demand and rising costs for companies.”
“The government is closely monitoring the downside risks to growth,” said Chang Jian, a Hong Kong-based economist at Barclays Capital. “With an expected deceleration in property investment and exports, we expect to see more weakness in industrial activity.”
The government aims to stabilize growth and consumer prices to “promote social harmony,” Wen said. He made the comments during meetings with company executives including Liang Wengen, chairman of Sany Heavy Industry Co. Ltd. and Zhan Chunxin, chairman of Zoomlion Heavy Industry Science and Technology Co. Ltd., according to the government statement.
China will continue to focus on rebalancing growth, restructuring the economy and increasing consumer and investment demand to support the “real economy,” he said.