China makes growth its priority as economy slows

Beijing: Sustaining rapid growth is China's economic priority, President Hu Jintao said yesterday as an official survey pointed to a swoon in the all-important manufacturing sector.

In a sign of official concern that the world's fourth-largest economy is slowing too sharply, the central bank has authorised banks to increase their lending by 5 per cent, banking sources told Reuters yesterday. The targeted easing could release around 200 billion yuan ($30 billion) of fresh credit.

"We must maintain steady, relatively fast development and control excessive price rises as the priority tasks of macro adjustment," Hu told a select group of foreign reporters at the Great Hall of the People.

Hu was speaking a week before the opening of the Olympic Games, widely seen at home and abroad as crowning China's emergence as a major economic power.

China would press ahead with reforms to ensure that the "spiritual legacy" of the Games would be an enduring benefit for the country, Hu said in his first interview with Western media.

"At the same time as constantly deepening reform of the economic system and achieving sound and fast economic and social development, we will continue pursuing comprehensive reforms, including reforms of the political system," the president said.

Expansion pace

China's economy grew 11.9 per cent in 2007, the fifth straight year of double-digit growth, but the pace of expansion slowed to 10.4 per cent in the first half of this year as demand for China's exports softened and credit curbs kicked in.

The leadership of the ruling Communist Party signalled last Friday that the slowdown was too abrupt by saying its economic priority was to maintain stable growth, while fighting inflation. Previously, the party had stressed the need to prevent the economy from overheating.

An official survey of manufacturers showed an apparently severe deterioration in the industrial sector last month.

The monthly purchasing managers' index compiled by the China Federation of Logistics and Purchasing fell to 48.4 from 52.0 in June. It was the first time that the reading had dropped below the boom-bust line of 50 since the survey was launched in 2005.

Hu said China had maintained solid growth in the first half despite fierce snowstorms that swept the south of the country in January and May's devastating earthquake in Sichuan, which killed more than 70,000 people.