Chinese Premier Wen Jiabao has called for more aggressive efforts to preset and fine-tune economic policies, as the world’s second largest economy still faces huge downward pressure.
Speaking during an inspection tour of east China’s Jiangsu Province from Friday to Sunday, he said the economy is running at a generally stable pace, but there is still huge downward pressure.
The government should “preset and fine-tune its policies in a more aggressive manner,” while sticking to pro-active and prudent monetary policies, he said.
Wen said attention should be paid to improving structural tax reduction measures and resolving structural problems between credit supply and demand, and to make government policies more targeted, forward-looking and effective.
At a meeting held in Jiangsu provincial capital of Nanjing on Sunday, Wen said the government made a timely shift to pro-growth measures in April, and those are now working, with the economy moving toward stabilized growth albeit at a slower pace.
Domestic demand continues to act as a major driver of the nation’s growth, which is still within the targeted range, he told the gathering of top officials from Liaoning, Jiangsu, Zhejiang, Anhui and Guangdong provinces.
The nation pared its gross domestic product (GDP) growth target for 2012 to 7.5 percent from 8 percent in March, in the face of a persistent slump in the United States and spreading debt woes in the EU.
While stressing the role of domestic demand in future growth, Wen said the government should earnestly implement consumption-boosting measures adopted lately to help drive growth.
Stabilizing investment currently plays a key role in expanding domestic demand and maintaining growth, the premier noted, adding that investment should be made in accordance with the national medium- and long-term development program and serve the needs of urbanization, economic restructuring and people’s well-being.
Dragged down by lackluster external demand and government efforts to cool inflation, China’s GDP growth slowed to an almost three-year low of 8.1 percent in the first quarter. Key economic indicators released lately showed further downward risks.
To buoy the economy, China has adopted a string of pro-growth measures, including lowering banks’ reserve ratio to boost lending, subsidizing energy-saving household electrical appliances and speeding up approval for major construction projects.
In its latest move, the central bank cut the benchmark interest rate two times in a month, in a bid to inject liquidity into the market.
During two separate meetings with over 30 entrepreneurs and association heads on Saturday, Wen called for enterprises to step up innovation to cope with shrinking exports and rising production costs.
Miu Hangen, head of Chinese textile manufacturer Jiangsu Shenghong Group, said the biggest challenge for textile companies currently is dropping overseas demand, and suggested a tax reduction to relieve pressure.
Wen said structural tax reduction should be directed in a manner to boost innovation, and the government will implement active fiscal policies to support enterprises.
As some photovoltaic, wind power and steel companies expressed their worries over declining profits, the premier said the drop was not only caused by sluggish external demand, but also by oversupply.
Wen said government efforts to maintain growth are not short-term responses, and the work will be combined with the nation’s restructuring and reform, to foster technology improvement and eliminate antiquated production.
He also urged enterprises to explore markets in regions such as the Association of Southeast Asian Nations, Central Asia and South Asia, to diversify trade partners in the face of a rising sense of trade protectionism.
During visits to two local low-income housing sites on Friday and Saturday, Wen said control over the real estate market is still in a critical period, and the task to cool the sector remains arduous.
“The government should make curbing speculative purchases a long-term policy and unswervingly carry on control measures over the sector, so as to make home prices return to reasonable levels and avoid price rebounds,” according to the premier.
At the same time, the government should step up studies on property tax reforms, and move faster in establishing long-term mechanisms and polices, Wen said.
Efforts should also be made to increase supplies of commercial homes and steadily push construction of low-income housing, he added.
Data from the China Index Academy showed the average home price in 100 major cities edged up 0.05 percent in June from a month ago, ending a nine-month decline, raising fears of a new price surge.
The government has adopted a raft of tightening measures such as higher down payments and property tax trials to contain runaway property prices, which have been a major public concern in recent years.
China has vowed to build 36 million affordable housing units during the 2011-2015 period to meet demand from low-income families. In 2011, it started construction of 10 million units.