China faces serious challenges in stabilizing prices as economic growth slows amid international financial turmoil, a senior Chinese Cabinet member said on Wednesday.

"Generally speaking, the pressure of price surges has greatly eased and problems caused by slumping prices of certain key commodities are becoming outstanding," said Zhang Mao, vice minister of the National Development and Reform Commission, delivering a Cabinet report to the National People's Congress Standing Committee, the country's top legislature.

International price fluctuations and declining prices for certain farm products, rising enterprise costs, employment difficulties and problems with the pricing of resource products are all factors contributing to the difficulty of stabilizing prices, he said.

There has been a sharp turnaround in consumer price pressure in the past few months. The National Bureau of Statistics said on December 11 that the consumer price index (CPI), the main gauge of inflation, rose at a slowing annual rate of 2.4 percent in November.

That was the seventh consecutive decline for the CPI, which was driven down by plunging world commodity prices and sluggish demand as the global financial crisis deepened.

Last year, the CPI rose 4.8 percent, the highest rate since 1997 and well above the 3 percent target, mainly due to higher food and housing costs.

The CPI rose 7.9 percent in the first half of this year -- year-on-year -- with a 12-year-high of 8.7 percent in February.

However, Zhang expressed confidence that China could withstand the challenges.

Based on the situation in the first three quarters, China's overall economic position is good, he told lawmakers.

"China has the ability and power to withstand risks, since it has a big domestic market and it still has much room for (economic) adjustment and control," he said.

Gross domestic product (GDP) growth slowed to 9.9 percent in the first three quarters, down 2.3 percentage points from the same period last year and below 10 percent for the first time in five years.

Zhang said China will strive to keep next year's CPI change at a reasonable margin by improving price monitoring and alert capability, pressing forward with pricing reforms, stimulating domestic demand and increasing support to agriculture to improve farmers' income.

The government will also carry out an in-depth investigation into the country's real estate market, build more houses for low-income homes and take measures to prevent land price surges.

The General Office of the State Council on Sunday unveiled details of a real-estate stimulus package. The measures include building more houses for low-income urban homes, encouraging home buying, supporting property developers in a changing market, enhancing role of local governments in stabilizing the real estate market, and improving surveillance on the property market.

It detailed the goal for 2009, during which the government will help overcome housing difficulties for 2.6 million low-income urban homes and 800,000 households in shantytowns.

"China is facing the arduous task of stabilizing prices to maintain a stable and relatively rapid economic growth," Zhang said.

"Given the serious international and domestic (economic) situation, we must well handle our own business to keep domestic economy from a big rise and fall, which will not only help our own development but will also be a great contribution to world economy," Zhang said.

China has announced a series of measures to stabilize prices over the past few months, including a 100 billion yuan (about US$14.7 billion) stimulus package in the fourth quarter to stimulate domestic demand and five consecutive loan and deposit rates cuts since September.

Other measures included a fuel prices cut and a value-added tax (VAT) reform which will reduce the tax burden on companies by more than 123 billion yuan next year.

(Xinhua News Agency December 25, 2008)