Top official: Severe challenge for China to stop slowdown

Special Report:Global Financial Crisis

BEIJING, Nov. 14 (Chinese media) -- A senior Chinese planning

official on Friday acknowledged that the external economic situation has "posed

a severe challenge" for China to maintain its economic growth.

"The economic slowdown in China is becoming more

clear, especially after September," said Mu Hong, vice director of the National

Development and Reform Commission (NDRC).

The growth rate of October's industrial value-added

output dropped to a seven-year low of 8.2 percent, which analysts said was

strong evidence of a slowdown.

If the slowdown accelerated, it would severely damage

China's productivity, said Mu. "It is why the Chinese government decided to make

major shifts in macroeconomic policies and launched the 10stimulus measures."

The central government would provide 1.18 trillion

yuan of the 4-trillion-yuan (586 billion U.S. dollars) economic stimulus

package, said Mu at a press conference organized by the State Council

Information Office.

The central government's investment, combined with

that of businesses and local governments, would bring the total spending to

about 4 trillion yuan by the end of 2010, he said.

Though Chinese law prohibited local governments from

raising capital through bond issues, the central government was considering

allowing "local governments raise funds by loan transfers or through appropriate

channels or measures with central approval", said Mu.

The government also welcomed all types of capital,

including private equity, to help sustain economic growth, Vice Finance Minister

Wang Jun told the press conference.

It was the first time the government had revealed

such details about its spending plans.

"The estimated 4 trillion yuan would be only part of

the country's total investment," Mu said, suggesting that investment from across

society might be even higher.

Officials have said that a "large part" of the total

package was new money, but they have not provided specific figures.

The stimulus package was announced on Sunday amid

rising concern about a sharp slowdown in the world's fourth-largest economy. A

total of 100 billion yuan would be added to government expenditure during the

fourth quarter. China's gross domestic product ended its two-digit growth in the

third quarter, rising by9 percent, down from 10.1 percent in the second quarter

and 10.6 percent in the first quarter.

But Mu said he was "very confident" that China would

see through the crisis, as it recovered from the severe disasters that hit the

country in 2008.

With a population of 1.3 billion people, China had

strong potential to boost investment and consumption, Mu said. China had

considerable room for maneuver if it could boost its domestic demand.

"Boosting domestic demand has become the priority of

economic work," Mu said. The package would stimulate both short and long-term

demand, as it would spur economic growth while transforming the type of growth.

The stabilization of foreign trade situations was

also an important part of the macro-economic controls, said Mu.

"We will encourage and guide exporters to explore the

emerging markets as orders from traditional markets like the U.S. and Europe

wane."