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Premier Wen Says China Will Focus on Growth, Xinhua Reports

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May 20 (Bloomberg) -- Chinese Premier Wen Jiabao said the government will focus more on bolstering economic growth, indicating policies may be loosened further as inflation moderates.

“The country should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations,” Wen said during a tour of Wuhan, the capital of China’s Hubei province, from Friday to Sunday.

“We should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth,” Wen said.

Wen’s remarks cited in the report, which didn’t mention concern about inflation, indicate the government might take more aggressive steps to support the economy after April data showed the slowdown may be sharper than expected. The central bank this month cut banks’ reserve requirement ratio for the third time since November to boost liquidity.

“Going forward, we expect a clearer easing in macro policy and a pickup in sequential growth,” Goldman Sachs Group Inc. economists said in a research note on May 18, adding liquidity conditions will probably be loosened while approvals on new infrastructure projects could be accelerated.

Forecast Lowered

Goldman Sachs lowered its forecast for China’s 2012 economic growth to 8.1 percent from a previously estimated 8.6 percent, joining similar moves by banks including Citigroup Inc. and UBS AG after April’s data trailed expectations.

China’s exports and imports in April expanded the least since the global financial crisis. Industrial output rose at the slowest pace since 2009, after the government tightened credit since last year to cool the property market and inflation.

Wen said the central government will continue to strengthen and improve macro control efforts, boost domestic consumption and stabilize external demand to promote steady and relatively fast economic growth, according to Xinhua.

More signs of weakening demand have emerged as home prices fell in a record number of Chinese cities last month and car dealers posted inventories that foreshadowed deeper price cuts.

The country may expand at the slowest pace in 13 years in 2012, a Bloomberg News survey showed, with analysts forecasting a further 100 basis-point reduction in the reserves ratio by year-end.

At the same time, the government’s concern about inflation may be eased as consumer prices climbed 3.4 percent from a year earlier in April, after surging to three-year high of 6.5 percent in July.

The government will continue to implement structural tax reductions to ease companies’ financial burdens, Wen said. Wen also asked local authorities to carry out property tightening measures and increase affordable housing for low-income earners to ensure a healthy property market, according to the Xinhua report.

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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