Interpac Business and Migration Solutions Melbourne Australia

(July 5, 2010)

CHINESE Premier Wen Jiabao says the country's economic policies "face increasing dilemmas".

He said the impact of the global financial crisis is more serious than expected, but he reiterated that China won't hold back steps to restructure the economy for growth.

The remarks were made after two purchasing managers' indexes issued last week showed China's manufacturing economy slowed in June and after China on Friday revised upward its gross domestic product growth for 2009.

The GDP revision means China's year-to-year growth will have a higher comparison base for the second and following quarters, so the growth may be lower than economists' expectations.

Despite the widely expected slowdown, Mr Wen reiterated that China will continue its economic policies but increase their flexibility, to "solve current significant and urgent problems" while "laying foundations for stable and relatively fast economic growth of 2011 and in a longer term."

He was speaking at a economic forum held on Saturday in the central Chinese city of Changsha, according to a statement posted on the central government's website.

"China's current economic situation is sound, but the domestic and global economic environment is extremely complicated," Mr Wen said.

He said Beijing will try to maintain relatively fast economic development while managing inflation.

The statistics bureau on Friday revised upward economic growth for 2009 to 9.1 per cent from 8.7 per cent. The revision was due to higher contributions from secondary and tertiary industries. Secondary industries include the mining, manufacturing and power sectors; tertiary industries cover services. Primary industries are farming, forestry and fishing.

In 2008, China's economy expanded 9.6 per cent.

The bureau said China's nominal GDP, evaluated at current market prices without adjustment for inflation, reached 34 trillion yuan ($6 trillion) in 2009. At last year's average exchange rate, China remained the world's third-largest economy, behind Japan with a 2009 GDP of just over $5.9 trillion.

Fast-growing China is expected to surpass Japan as the world's second-largest national economy after the US -- in terms of annual output measured in US dollars at market exchange rates -- but it will likely have to wait until the end of 2010 to pass that milestone.

Other ways of ranking economies produce different results. In terms of purchasing-power parity, China has been the second-largest economy for a long time. And if the European Union is counted as a single economy, it is the world's largest, pushing the US to second place.

China is due to release its second-quarter GDP data July 15. Some economists expected the growth slowed to just over 10 per cent from the first quarter's 11.9 per cent year-to-year growth because of Beijing's tightening measures this year.

Beijing this year gradually withdrew stimulus policies adopted last year amid the global financial crisis. In particular, China decided last month to loosen the yuan's peg to the US dollar and allow the currency to rise, and adopted restrictive policies on the housing market that have been crimping sales since being put in place in mid-April.

(Source: the Australian)