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Grim data will not darken long-term economic outlook


11:42, June 10, 2013

BEIJING, June 9 (Xinhua) -- Latest data highlights worsening conditions in the world's second largest economy, fanning concerns that even a relative bright spot in an otherwise gloomy global economy is losing its luster.

China's consumer price inflation slowed in May while new yuan-denominated lending fell below expectations, presenting new evidence that the national economy is cooling under pressure of both domestic problems and global woes.

The National Bureau of Statistics said Sunday that the country's consumer prices index rose 2.1 percent last month, the lowest rate in four months and below the market expectation of 2.5 percent. The producer price index fell 2.9 percent, the lowest since September.

Growth in bank lending has also slowed. The central bank said the country's banks lent 667.4 billion yuan (107.65 billion U.S. dollars) in new yuan-denominated loans in May, falling for the second consecutive month.

The subdued inflation renewed speculation that the central bank may cut interest rates later this year in an effort to reduce enterprises' financing costs and help contain "hot money" inflows.

Liu Ligang, chief greater China economist at ANZ Banking Group, expects the central bank to cut interest rates soon to ease credit strains plaguing small enterprises.

Some analysts said there is some room for interest rate cuts, but policy-makers might prefer increasing fiscal spending rather than easing monetary policy, as the latter will risk inflating property prices, worsening the problem of excessive production capabilites and saddling the economy with bad debts.

Sunday's data, combined with disappointing trade figures released Saturday, suggested "unprecedented pressure" mounting on China's economy in the short term, said Tan Yaling, head of the China Forex Investment Research Institute.

However, Tan is optimistic about the country's long-term economic outlook as the new leadership focused more on economic restructuring to improve the quality and efficiency of growth.

Zhang Yansheng, a researcher with the National Development and Reform Commission, the country's top economic planner, noted the limp data as normal outcomes of restructuring and said there is no need to panic about the slowdown.

The key to sustain China's growth is reform and restructuring, but not one-off stimulus, Zhang said.

After three decades of double-digit expansion that saw China's economy become the world's second biggest, growth slowed dramatically in 2012 to 7.8 percent, the slowest pace in 13 years.

Chinese officials have signaled in recent months that the nation's fast GDP growth during the past three decades needed to shift down a gear as the economy moved to domestic-demand-driven expansion.

Premier Li Keqiang told provincial leaders on Saturday that the national economy is still growing at a relatively fast pace and within a reasonable range, and that the employment situation has been steady this year, though complicated factors are ahead, which need to be monitored closely.

"We have full confidence in sustained and healthy long-term economic development," Chinese President Xi Jinping said Saturday during a meeting with his U.S. counterpart Barack Obama, adding that the risks and challenges are generally controllable and relevant measures have been taken to prevent them.

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