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China's premier warns of further economic slowdown

Associated Press Modified: July 8, 2012 at 6:45 am •  Published: July 8, 2012

BEIJING (AP) — China's economy faces "huge pressure" to slow further despite stimulus measures, Premier Wen Jiabao said Sunday, damping hopes for a quick recovery from the deepest slump since the 2008 global financial crisis.

Companies and investors are closely watching the world's second-largest economy for signs of a further slowdown which could have global repercussions by hurting Chinese demand for goods from the United States, Europe and other struggling economies.

"The economy is running at a generally stable pace, but there is still huge pressure for it to go downward," the official Xinhua News Agency paraphrased Wen, the country's top economic official, as saying during a weekend visit to eastern China.

The government has cut interest rates twice in a month, reduced gasoline prices and promised more spending on low-cost housing and other public works to revive growth that fell to a nearly three-year low of 8.1 percent in the first quarter.

Despite that, forecasters expect data due out this week to show that growth fell as low as 7.3 percent in the second quarter.

The slowdown raises the risk of job losses and unrest at a politically awkward time for the ruling Communist Party. It is trying to enforce calm ahead of a once-a-decade handover of power to younger leaders.

In his weekend remarks, Wen said government measures to boost economic growth were showing results, Xinhua reported. "The economic slowdown is tending toward stability," Xinhua paraphrased him as saying.

The government is trying to reduce reliance on exports and investments to drive growth by boosting domestic consumption. Wen said that is Beijing's "fundamental standpoint" to improve the economy.

He said the government also is trying to diversify and promote stable export growth. The government has set a 10 percent growth target this year for trade, which the Commerce Ministry has said is achievable, barring unexpected setbacks in Europe or elsewhere.

Wen promised to "fine-tune economic policies," according to Xinhua, but no details or new initiatives were reported. He said the government will press ahead with changes in the tax system that should reduce the burden on many taxpayers, but gave no timetable.

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