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China sets GDP target of 8%
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Premier Wen Jiabao said today that the country's economy is expected to rise eight percent this year while the government sees inflation and overheating as the key economic threats.

The eight percent target was unchanged from that of last year and in line with goals of seven percent to eight percent for the past decade. The economy expanded 11.4 percent in 2007, the fastest pace in 13 years.

But the fast-growing economy also raised inflation concerns.

The government will use price controls and curb soaring investment to hold prices to a 4.8 percent annual rise, Wen said in his annual policy report to the National People's Congress (NPC), the nation's top legislature body, in Beijing this morning.

"Financial controls need to be strengthened, and the excessively fast growth in money supply and lending should be curbed,'' Wen said.

China's consumer price index, a main gauge for inflation, averaged 4.8 percent last year, well above the government's three percent target, and hit an 11-year high, mainly due to large increases in the cost of food and housing.

"The current price hikes and increasing inflationary pressures are the biggest concern of the people," Wen told nearly 3,000 deputies of the congress in the Great Hall of the People.

"Because factors driving prices up are still at work, upward pressure on prices will remain great this year," he said.

"The primary task for macro-economic control this year is to prevent fast economic growth from becoming overheated growth and keep structural price increases from turning into significant inflation," he added.

Wen said the government would stick to its tight monetary policy and improve financial controls to restrain fast credit growth.

Key lending and deposit rates are 7.47 percent and 4.14 percent. Banks are required to set aside 15 percent of deposits as reserves. The government also curbs lending via direct instructions to lenders.

The premier also promised to make China's exchange rate system more flexible. China's trade surplus hit a record of US$262 billion last year.

(Shanghai Daily March 5, 2008)

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