China's premier calls for higher priority on economic growth amid slowdown

BEIJING, China – Premier Wen Jiabao called for more priority to be given to boosting China’s slowing economic growth, a state news agency reported Sunday, after unusually weak industrial activity in April prompted alarm about the world’s second-largest economy.

During a weekend trip to the industrial city of Wuhan, Wen promised to boost domestic consumption and strengthen Beijing’s economic controls, the Xinhua News Agency said.

“We should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth,” Wen said, according to Xinhua. It gave no details of possible new initiatives.

The government spent the past two years trying to cool inflation and steer rapid economic growth to a more sustainable level. But a plunge in global demand prompted Chinese leaders to start reversing course late last year. Unexpectedly weak industrial activity in April prompted some analysts to say they need to move faster.

Factory output in April fell to the lowest level since the 2008 global financial crisis and consumer spending and home sales were weaker than forecast. That jarred hopes China can achieve a “soft landing,” with growth rebounding next year.

Economic growth fell to a nearly three-year low of 8.1 per cent over a year earlier in the first quarter and is expected to fall further. The World Bank and International Monetary Fund are forecasting growth this year of 8.2 per cent.

Private sector analysts say Beijing is likely to move more cautiously in response to this slowdown than it did after the 2008 crisis. Then, a huge stimulus program helped China rebound quickly but fueled inflation and a wasteful building boom.

Government plans call for boosting domestic consumption to reduce reliance on exports and investment to drive growth. Chinese consumer spending is rising but has failed to fill the gap due to weak global demand for exports.

Lending and purchase curbs imposed to cool surging housing costs have caused a slump in the real estate industry, a key driver of China’s growth, but the government has kept them in place, saying prices still are too high.

During his weekend trip, Wen affirmed that message, calling on local authorities to enforce measures meant to cool housing costs and increase supplies of affordable housing for low-income families, according to Xinhua.