Official says China's slowdown has ended but economy not ready for recovery

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Chairman and Secretary of the CPC Party Committee of the National Development and Reform Commission Zhang Ping speaks at a press conference held as part of the 18th Communist Party Congress in Beijing, China, Saturday, Nov. 10, 2012. (AP Photo/Ng Han Guan)

BEIJING, China - China's sharp economic downturn has ended after trade and consumer spending improved in October but the world's second-largest economy is not ready for a recovery and exporters face tough conditions, officials said Saturday.

The economy should be able to meet the government's 7.5 per cent growth target this year, the chairman of the country's planning agency told a news conference during a congress of the ruling Communist Party.

The comments echoed private sector analysts who say economic activity is improving but a recovery from China's deepest slump since the 2008 global financial crisis will be gradual and weak.

"The figures do indeed indicate an obvious trend of the Chinese economy stabilizing," Zhang Ping said.

"That said, we should not let down our guard," he said. "Our conclusion is that the foundation is not solid enough for a rebound in the Chinese economy and therefore we need to step up our efforts."

Trade data on Saturday showed export growth accelerated in October to 11.6 per cent from the previous month's 9.9 per cent. Data released Friday showed auto sales, consumer spending and investment also improved in October.

Zhang gave no indication what new initiatives Beijing might consider. The government has cut interest rates twice this year and is injecting money into the economy through higher spending on building airports and other public works and investment by state companies. But it has avoided a large stimulus after its huge response to the 2008 crisis fueled inflation.

Economic growth fell to a three-and-a-half-year low of 7.4 per cent in the quarter ending in September. Growth for the first three quarters of the year was 7.7 per cent, putting the government's target for the year within reach.

Also in October, inflation fell, giving Beijing room to launch new stimulus if needed with less danger of igniting new price spikes.

The improvement is welcome news for the ruling Communist Party, which is in the midst of a congress to install younger leaders who might benefit from an economic uptick.

Still, Commerce Minister Chen Deming warned that Chinese exporters face tough conditions due to weak global demand and rising operating costs.

"The trade situation will be relatively grim in the next few months and there will be many difficulties next year," Chen told a news conference.

Stronger exports will help manufacturers that were battered by last year's slump in global demand. Thousands closed and survivors slashed payrolls, raising the danger of unrest as Communist leaders tried to enforce calm ahead of the leadership transition.

The import weakness meant China's global trade surplus widened by nearly 90 per cent over a year ago to $32 billion — the highest monthly level this year.

Chen also warned that "growing trade protectionism" might hurt exporters.

World leaders pledged after the 2008 crisis to avoid steps that might hinder trade and hamper a recovery. But Beijing and trading partners including the United States, Europe and Japan have raised tariffs on goods including autos and solar panels in a series of disputes over market access, subsidies and other issues.

Lacklustre Chinese import demand reflects government curbs on lending and investment to cool inflation and overheating.

Those controls helped to crush surging prices but hurt China's large construction industry and depressed its voracious appetite for steel beams, wiring and other materials made of imported iron ore, copper and other commodities. That is bad news for miners and other commodity exporters such as Australia and Brazil that supply China.