China forecasts growth in its economy will slow

/ Source: The Associated Press

China said Sunday its economy can weather the effects of the global financial turmoil, but growth will decline as the expansion of business profits and public revenues slows.

The State Council said in a statement at the end of an executive meeting led by Premier Wen Jiabao that the turmoil and economic instability will have a "gradual" effect on the country.

It said China's economic growth will slow along with corporate profits and public revenues, and as capital markets continue to fluctuate.

"Unfavorable international factors and the serious natural disasters at home have not changed the basic growth situation of our country's economy," said the statement posted on a government Web site. "Our country's economic growth has the ability and vigor to resist risks."

The country was hit by two major natural disasters this year — a winter storm just before February's Lunar New Year that left scores dead and hundreds of thousands stranded during the country's busiest travel period, and a magnitude 7.9 earthquake in May that left nearly 90,000 people dead or missing.

China must "adopt flexible and cautious macroeconomic policies" to maintain stable growth, the statement said.

The council said that in the fourth quarter, China should focus on developing the rural economy, while striving to control inflation.

The government should also help local small and medium enterprises to grow by encouraging financial institutions to provide more loans to them, the statement said.

China faces difficulties including high energy costs and inflation, but officials say the country has growth potential despite the global uncertainties because of its large labor pool, vast domestic market and the increasing competitiveness of its companies.

Economists have cut China's growth forecasts to as low as 9 percent for the year, down from last year's 11.9 percent. That would be the highest rate for any major country, ut the country's leaders want to keep growth robust to reduce poverty and avoid job losses that could fuel political tensions.