Chinese Premier Wen Jiabao warned of a difficult start in 2012 for the world?s second-largest economy while reiterating pledges to expand domestic demand in an effort to offset the effects of crises in the U.S. and Europe.
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China has long been dependent upon exports to the U.S. and Europe for economic growth, and now faces a potential slowdown as demand weakens abroad.
?The first quarter of the year may be quite difficult,? Wen said, according to a statement by the State Council, China?s cabinet. ?We are now in a situation where pressure from an economic downturn and high prices both exist.?
He added that slowing external demand coupled with the rising cost of doing business domestically has further complicated the situation when compared to the financial crisis in 2008.
Anxious to prevent a sharp slowdown, but at the same time trying to combat inflation, which hit a more than three-year high of 6.5 percent in July, Beijing is trapped between a rock and a hard place.
The Chinese economy grew an estimated 9 percent or more last year, the official Xinhua News Agency reported, slower than in 2010, when annual growth was more than 10 percent, and the economy is widely expected to slow even further this year.
So leaders have cut the lenders? capital requirements for the first time in three years in a bid to boost growth. Last month, Beijing also vowed to maintain ?prudent? monetary policies after a major meeting to set the nation?s economic course in 2012 where leaders agreed to ?guarantee steady growth? ? a pledge reiterated by Wen.
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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com
To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com
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