Wen Jiabao warns China's growth is under pressure

Chinese factory worker The uncertain global economic environment has hurt demand for Chinese goods

China's Premier Wen Jiabao has warned that the country's economy is under pressure and that it is facing problems that may last for some time.

However, he said that Beijing will be able to meet its growth target, despite those issues.

He said that easing inflation had given more room to policymakers to introduce measures to spur growth.

China has been hurt by slowing global demand for its exports and lacklustre growth in domestic consumption.

"We have the conditions and capabilities, and will be sure to fulfil this year's economic and social development targets," Premier Wen was quoted as saying by the Xinhua news agency.

Further easing?

Premier Wen's comments comes amid worries of a sharp slowdown in China's economy, the world's second-largest.

Start Quote

We continue to believe that a reserve ratio requirement cut is more likely than a rate cut”

End Quote Dariusz Kowalczyk Credit Agricole CIB

Its gross domestic product grew at an annual rate of 7.6% during the April-to-June period.

While that may be healthy compared to many developed Western economies, it was the slowest pace of expansion for China in three years.

Data released earlier this month showed a sharp decline in export and import growth during July, indicating that both external and internal demand were slowing.

The economic conditions in the eurozone and the US, two of China's biggest markets, continue to remain weak, adding to fears that China's growth may slow further in the near term.

That has triggered calls for easing of monetary policy.

China's central bank, the People's Bank of China, has already cut its key interest rates twice since the start of June.

It has also cut the reserve ratio requirement, the amount of money the country's banks must keep in reserve, three times in past few months, in a bid to boost lending.

Analysts said Mr Wen's comments indicated that Beijing was likely to ease policies further to sustain growth.

"We continue to believe that a reserve ratio requirement cut is more likely than a rate cut and expect a move soon," said Dariusz Kowalczyk, a senior economist & strategist, at Credit Agricole CIB in Hong Kong.

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