Chinese premier says the country faces an uphill battle trying to cool economy

China faces a "tough job" in trying to slow economic growth that has intensified raw-material shortages and transport congestion, Premier Wen Jiabao (溫家寶) was cited as saying by the official Xinhua News Agency.

"We haven't fundamentally solved the salient problems -- the supply of coal, electricity, oil and transport are still very tight," Wen said in the statement to the agency. "The size of total investment is still very big, the government still faces a tough job" to slow economic growth.

While the pace of investment has slowed, it's still rising fast in some industries, the National Bureau of Statistics said in a separate statement released through Xinhua.

The government has been trying to slow expansion by damping investment in some industries. The central bank has told banks to curb lending to industries it deems overheated, while the government has banned investment in certain projects.

China's fixed-asset investment rose 35 percent to 1.54 trillion yuan (US$186 billion) in the January to May period, 8 percentage points slower than in the first four months, it said.

In the steel, cement and aluminum industries, such investment expanded at a more-rapid 77 percent, 55 percent and 38 percent respectively, the bureau said.

spending

The world's seventh-largest economy expanded a revised 9.8 percent in the first quarter, driven by a 43 percent surge in spending on factories, roads and other fixed-asset projects.

The government's measures have had some effect on growth, with the main economic indicators for May showing that economic expansion has begun to slow.

"The measures taken have already begun to show preliminary effect," said Liu Mingkang (劉明康), head of the China Banking Regulatory Commission, in a report on Hubei province, according to a statement posted on the commission's Web site. "China's economy should be able to make a `soft landing.'"

That hasn't stopped calls from within the government for monetary policy initiatives, such as raising interest rates, instead of administrative measures like those already taken.

China has to look out for any spurt in investment growth as some projects may have been temporarily slowed because of the government's scrutiny, the statistics bureau said.

The Chinese premier echoed this sentiment. He asked government departments to watch out for any rebound in investment while ensuring stable growth.

"The overall economic situation is good and the macro economic adjustment has begun to take effect," Wen was cited as saying by Xinhua.