Chinese planner says no 'double-dip' for economy

[March 08, 2011]  SHANGHAI (AP) -- China's economy is safe from a "double-dip" slowdown in growth, a top economic planner said Tuesday, though he acknowledged challenges in keeping inflation under control and cutting back on excessive and wasteful investments.

"First of all, you can say for sure that the Chinese economy will not double dip," Li Pumin, a spokesman for the National Development and Reform Commission, said in an online conference posted on the main government website.

Li pointed to the gradual world economic recovery and China's own strong potential as factors supporting stable expansion after the 10.3 percent growth last year that displaced Japan as the world's second largest economy.

China's economy slowed only briefly during the global financial crisis, as massive government stimulus spending helped counter the impact of plunging exports. But that same spending, along with surging food prices, is now seen as a factor behind inflation that hit a 28-month high in November and remains above the government's target of 4 percent.

After growth, Beijing's top priority is stable prices, Li said.

Apart from ensuring adequate and efficiently distributed food supplies, the government needs to "resolutely control high and excess capacity and redundant, wasteful construction and to improve the quality and efficiency of investments," he said.

China's share markets have surged in recent days following reports that inflation may have eased from the near-5 percent level it has hovered at in recent months, easing worries the government may further tighten credit or hike interest rates.

But a top central bank official, cited in the newspaper China Securities Journal on Tuesday, said the issue of whether to raise interest rates would depend on various factors, including prices, consumer demand and investment and the international situation.

China will handle the issue in a "forward-looking, scientific and effective manner," the report cited Du Jinfu, a vice governor of the People's Bank of China as saying.

Beijing has boosted the amount of capital banks are required hold as reserves eight times since early 2010 and hiked interest rates three times since October, seeking to pull money out of circulation and cool prices.

Li, in his online remarks, said inflation figures for February, due for release Friday, would show that the government's anti-inflation measures were working.

He reiterated the government's determination to ensure "market stability" and keep prices in line -- an urgent concern for the leadership given China's history of unrest linked to dissatisfaction over inflation.

There are signs some of the government's policies aimed at chilling the overheated housing market are having the desired effect. In Shanghai, sales of existing homes fell 60 percent last month from the month before, the newspaper Shanghai Daily reported, citing data from Century 21 China Real Estate. Sales of new homes have been falling at double-digit rates for several weeks following fresh limits on home purchases and the imposition of a new tax on some housing transactions.

Average prices for the city fell to 17,737 yuan ($2,700) per square meter, the lowest level since July, the report said.

[Associated Press; By ELAINE KURTENBACH]

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