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China turns corner on economy as party chooses new leaders

Members of the Xinjiang provincial delegation and representatives from the National People's Congress (NPC) attend a meeting in the Xinjiang
Members of the Xinjiang provincial delegation and representatives from the National People's Congress (NPC) attend a meeting in the Xinjiang

By Kevin Yao

BEIJING (Reuters) - China announced on Saturday that it is effectively turning the corner on the economy and likely to meet its growth target for the year, more good news for Communist Party policy makers meeting in Beijing to anoint new leaders for the next decade.

The world's second-biggest economy had halted a slowing trend, the chief of the economic planning agency said, adding that he was confident GDP growth would exceed 7.5 percent in 2012 though at the same time warning against complacency.

Zhang Ping, head of the National Development and Reform Commission, was speaking to reporters on the sidelines of the 18th Party Congress at which outgoing President Hu Jintao said China should double its 2010 GDP and per capita income by 2020, as previous targets have implied.

Hu said China's development should be "much more balanced, coordinated and sustainable". The party, which has constantly stressed the need for continued one-party rule, has in recent years tied its legitimacy to economic growth and lifting hundreds of millions out of poverty.

"Signs of stabilization in the economy were getting more obvious in October," Zhang said. "We are fully confident that we can achieve the economic growth target for this year. In other words, we are able to maintain economic growth of above 7.5 percent.

"But we dare not lower our vigilance. The foundation of the economic stabilization is not solid enough... Under the backdrop of a persistent global financial crisis as well as a new situation and problems in the economy, we must make preparations for dealing with difficulties and challenges over the long term."

More than 2,200 delegates to the congress took a day off on Saturday, two days after Hu's opening speech. They spent Friday holding public debates on the speech at which they read out bits they particularly liked. Reuters reporters heard no contrary opinion.

Hu will hand over his post as party chief to anointed successor Vice President Xi Jinping. The congress ends on Wednesday, after which the party's new Standing Committee, at the apex of power, will be unveiled.

Only Xi and his deputy, Li Keqiang, are certain to be on what is likely to be a seven-member committee, and about eight other candidates are vying for the other places.

China's economy strode further along the road of recovery from its slowest growth in three years, data for October showed on Friday, as infrastructure investment accelerated and output from factories ran at its fastest in five months.

Data on Saturday showed the trade surplus ballooned to its biggest in 45 months in October as export growth darted to a five-month high above 11 percent, surpassing expectations and adding to other data that suggest a less urgent need for new economic stimulus measures.

Annual economic growth slowed to 7.4 percent in the third quarter - its weakest since early 2009 - leaving the economy on track to mark its most sluggish year since 1999.

But central bank head Zhou Xiaochuan cautioned on Thursday that external risks still loomed large and the People's Bank of China had policy room to respond if necessary.

CRITICAL REFORM

Zhang said China's economic slowdown this year had been caused by both weak global demand and government steps to adjust economic structures to put the economy on a more sustainable footing for the future.

Government officials have said repeatedly that they intend to use a period of slowing growth to make a series of adjustments to economic policy settings, particularly around prices administered by the state, that might otherwise risk fuelling inflation.

Such reforms are regarded as crucial, both by foreign analysts and government think-tanks, if China is to maintain robust growth needed to close a yawning wealth gap and support an urbanization drive core to Beijing's development plans.

Zhang said that inflation was stable in China. Official data on Friday showed consumer price inflation eased to its slowest pace in nearly three years in October, with the 1.7 percent rise from a year ago slower than the 1.9 percent posted in September. Economists polled by Reuters had expected it to hold steady.

Investors, though, have been concerned that efforts to cool the economy had been mistimed, unintentionally coinciding with a sharp slowdown in external demand, with recovery in the United States remaining tepid and Europe still unable to escape its sovereign debt crisis.

Beijing has responded by fine-tuning economic policy for a year to support growth.

China has cut benchmark interest rates twice this year, lowered bank reserve ratios three times since late 2011 and made repeated, large-scale liquidity injections into the financial system. It also said in September it had fast-tracked approvals on infrastructure projects worth about $157 billion.

(Writing by Nick Edwards; Editing by Nick Macfie and Ron Popeski)

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