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Severe Challenge for China to Stop Slowdown in Economic Growth

A senior Chinese planning official on Friday acknowledged that the external economic situation has "posed a severe challenge" for China to maintain its economic growth.

"The economic slowdown in China is becoming more clear, especially after September," said Mu Hong, vice director of the National Development and Reform Commission (NDRC).

The growth rate of October's industrial value-added output dropped to a seven-year low of 8.2 percent, which analysts said was strong evidence of a slowdown.

If the slowdown accelerated, it would severely damage China's productivity, said Mu. "It is why the Chinese government decided to make major shifts in macroeconomic policies and launched the 10 stimulus measures."

The central government would provide 1.18 trillion yuan of the 4-trillion-yuan (US$586 billion) economic stimulus package, said Mu at a press conference organized by the State Council Information Office.

The central government's investment, combined with that of businesses and local governments, would bring the total spending to about 4 trillion yuan by the end of 2010, he said.

Though Chinese law prohibited local governments from raising capital through bond issues, the central government was considering allowing "local governments raise funds by loan transfers or through appropriate channels or measures with central approval", said Mu.

The government also welcomed all types of capital, including private equity, to help sustain economic growth, Vice Finance Minister Wang Jun told the press conference.

It was the first time the government had revealed such details about its spending plans.

"The estimated 4 trillion yuan would be only part of the country's total investment," Mu said, suggesting that investment from across society might be even higher.

Officials have said that a "large part" of the total package was new money, but they have not provided specific figures.

The stimulus package was announced on Sunday amid rising concern about a sharp slowdown in the world's fourth-largest economy. A total of 100 billion yuan would be added to government expenditure during the fourth quarter. China's gross domestic product ended its two-digit growth in the third quarter, rising by9 percent, down from 10.1 percent in the second quarter and 10.6 percent in the first quarter.

But Mu said he was "very confident" that China would see through the crisis, as it recovered from the severe disasters that hit the country in 2008.

With a population of 1.3 billion people, China had strong potential to boost investment and consumption, Mu said. China had considerable room for maneuver if it could boost its domestic demand.

"Boosting domestic demand has become the priority of economic work," Mu said. The package would stimulate both short and long-term demand, as it would spur economic growth while transforming the type of growth.

The stabilization of foreign trade situations was also an important part of the macro-economic controls, said Mu.

"We will encourage and guide exporters to explore the emerging markets as orders from traditional markets like the US and Europe wane."

(Xinhua News Agency November 15, 2008)

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