Chinese Premier Wen Jiabao admitted on Thursday that the country is facing unprecedented difficulties and challenges, with continuous drop in economic growth rate due to the impact of the global financial crisis becoming a major problem.

When delivering a government report to the annual session of the Chinese legislature, he said that, the global financial crisis continues to spread and get worse. Demand continues to shrink on international markets; the trend toward global deflation is obvious; and trade protectionism is resurging.

"The external economic environment has become more serious, and uncertainties have increased significantly," he said.

"Continuous drop in economic growth rate due to the impact of the global financial crisis has become a major problem affecting the overall situation. This has resulted in excess production capacity in some industries, caused some enterprises to experience operating difficulties and exerted severe pressure on employment," according to the Premier.

Factors leading to decline in government revenues and increase in government expenditures have increased. It has become more difficult to maintain steady agricultural development and keep rural incomes growing, he added.

In addition, institutional and structural problems that have long hindered healthy economic development still remain, and some of them are still prominent. Consumption demand is insufficient, and development of tertiary industries is sluggish. Our capacity for independent innovation is weak. Consumption of energy and other resources is high. Environmental pollution is serious. Disparities in development between urban and rural areas and between regions are widening.

"Some problems affecting the vital interests of the people have not been fundamentally alleviated. There are still many problems demanding urgent solution in the areas of social security, education, health care, income distribution and public security," he said.

He continued that order in the market is not well standardized; market oversight and law enforcement are not fully in place, and the social credit rating system is still in need of improvement. A number of serious and major incidents concerning food and workplace safety have occurred, which have inflicted serious loss of life and property on the people and taught us a sobering lesson.

"We need to thoroughly appreciate how serious and complex the international and domestic economic situations are, be more mindful of potential perils and crises, fully exploit favorable conditions and actively respond to all challenges so that we can successfully accomplish all our tasks and prove worthy of the great expectations and trust conferred on us by the people," he concluded.

(Xinhua News Agency March 5, 2009)