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The Canadian Press - ONLINE EDITION

Chinese premier says economy improving but under pressure; promises market-opening reforms

BEIJING, China - China's economy improved in the latest quarter but faces "downward pressure," and Beijing will increase the strength of targeted policy measures to shore up growth, the country's premier said Monday.

Speaking at a news conference with visiting German Chancellor Angela Merkel, Premier Li Keqiang gave no indication how fast the economy might have grown in the three months ending in June after expanding by 7.4 per cent the previous quarter.

"China's economic performance in the second quarter has been improved from that in the first quarter. However, we cannot lower our guard against downward pressure," Li said.

Manufacturing grew in June at its strongest pace this year, but the expansion was weaker than normal.

Chinese leaders are trying to guide the economy toward self-sustaining growth based on domestic consumption, rather than exports and investment. Those plans have been complicated by weakness in exports, which support millions of jobs.

The premier and other leaders have ruled out an across-the-board stimulus but have tried to head off politically volatile job losses with more spending on building railways and other public works.

The ruling Communist Party's official growth target this year is 7.5 per cent, but leaders have tried to downplay expectations, saying the expansion might come in under that level.

Economic growth also is under pressure from declines in housing sales and prices, which are dragging on construction and other industries.

"The Chinese economy is also facing downward pressure, but we will keep up our composure and not adopt strong stimulus," Li said. "Instead, we will increase the strength of targeted measures."

Li promised more market-opening reforms. He has said previously improvement in economic growth must come from structural reforms, rather than stimulus spending.

On Monday, he promised to reduce burdens on small companies and to give them more access to financing.

"We must also inspire the vitality of the market and lend support to the real economy," Li said.

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