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China on course to deal with a economic fallout

China is fully able to add new measures to its 4-trillion-yuan stimulus package against any fallout from the economic downturn, Premier Wen Jiabao said yesterday.

"We have prepared contingency plans against the financial crisis and have "adequate ammunition" to face more difficult times, and we are ready to introduce new measures to stimulate the economy at any time," Wen said at a press briefing in Beijing after the conclusion of the annual parliamentary session.

China rolled out its 4-trillion-yuan two-year stimulus package last November to boost domestic demand and ease reliance on slumping exports, of which central government would fund 1.18 trillion yuan. Wen said the 1.18 trillion yuan will all be new spending and 595 billion yuan of it will be spent this year.

"The funds will be invested in public welfare, technological innovation, environmental protection and infrastructure projects," he said.

The rest will come from local governments, policy loans and corporate bonds.

The government will spend 3 trillion yuan on infrastructure projects and improving the livelihoods of its citizens and 1 trillion yuan on rebuilding earthquake-hit regions.

"Some of the projects in the package, such as road and rail schemes, were identified in the 11th Five Year Plan (2006-2010), but the stimulus package can speed up the process," Wen told reporters.

The government has also rolled out new projects in the package, such as building affordable houses for 7.5 million low-income families in three years and renovating 2.4 million dilapidated homes, he said.

Apart from the package, China is to cut taxes by 600 billion yuan, raise pensions, increase salaries for 12 million teachers and offer more subsidies to farmers, as well as spend 850 billion yuan in reforming the health care system within three years, Wen said.

Achieving the 8-percent economic growth target this year would be difficult, but it was still possible, he said.

China's economy cooled to a seven-year low of 9 percent last year and broke a five-year streak of double-digit expansion. In the last quarter of 2008, growth fell to 6.8 percent, the lowest in nine years.

Wen said setting the 8-percent growth target was "the government's commitment and responsibility" and showed "confidence and hope" amid the global financial crisis.

"It's just like we need a compass on a sailing vessel to know where we are heading and when we will arrive at the destination," he said.

China is in a stage of accelerating marketization and urbanization and its consumption is expanding, he said.

Europe and the United States were fighting the global crisis on two fronts, the financial sector and the real economy.

"In comparison, though China needs to fend off risks in the financial sector, the fiscal resources did not give a penny to fix loopholes in the sector," he said.

"On the contrary, the financial sector has provided a large quantity of loans for economic development."

Wen said confidence was still what China needed most to carry out the economic stimulus package which had been approved by the national legislature.

"Only when we have confidence can we have courage and strength, and only when we have courage and strength can we overcome difficulties," the premier said.


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