China's blames slowdown on policy controls

July 16, 2010 7:31:49 AM PDT
Premier Wen Jiabao said Friday the government intervened in the economy to slow China's rapid expansion to a manageable pace and promised to maintain "steady and fast growth" this year.

Second-quarter growth fell to 10.3 percent from the first quarter's 11.9 percent as Beijing wound down its giant stimulus and cooled credit, data showed Thursday. That would help to avert overheating but might weaken the global recovery if it hurts demand for foreign iron ore and other imports.

The decline was "primarily a result of active regulation and control," said Wen, the country's top economic official, at a news conference with German Chancellor Angela Merkel.

The communist government's growth target this year is 8 percent, but private sector analysts and the International Monetary Fund are forecasting up to 10.5 percent.

"In the second half, keeping policies stable will be the underlying tone for the regulation and control of the economy," Wen said. "The core issue is to properly handle the relations between the stable and fairly fast growth of the economy, restructuring the economy and managing inflation expectations."

China rebounded quickly from the global crisis on the strength of a flood of stimulus spending and bank lending. Beijing began winding down its stimulus in late 2009 and imposed lending and investment curbs to cool surging housing prices and prevent overspending on unneeded factories and other assets.

Officials say slower growth will help to promote efforts to restructure China's economy by boosting domestic consumption and reducing reliance on exports and resource-intensive investment.

"We will maintain the consistency and stability of policy and carry on adopting active fiscal policy and moderately relaxed monetary policy," Wen said. "We will upgrade our macrocontrols and make policies better-targeted and more flexible."

Wen said the government would make more efforts to promote energy efficiency and domestic consumption.