UPDATE 1-China's Wen says maintaining growth top priority

BEIJING, Nov 2 (Reuters) - Maintaining strong and stable economic growth amid the current global turmoil is China's main priority, Premier Wen Jiabao has written, warning of growing domestic social risks from a worldwide economic downturn. Wen made the warning in an essay for the ruling Communist Party's ideological journal, Seeking Truth (Qiushi), the China News Service reported on Sunday, carrying a full text of the long essay in Chinese. Wen said the chief macro-economic task of his government was "successfully maintaining the balance between the stable and relatively fast economic development and containing inflation." "Unfavourable changes" in the international economy may make it more difficult to achieve that balance, Wen wrote in the latest issue of the magazine, saying the priority for now is shoring up economic growth. "Against the current international financial and economic turmoil, we must must give even greater priority to maintaining our country's steady and relatively fast economic development," he wrote. "We must be crystal-clear that without a certain pace of economic growth, there will be difficulties with employment, fiscal revenues and social development...and factors damaging social stability will grow." China's economy grew 11.9 percent in 2007, but that rate slowed to 9.9 percent in the first three-quarters of this year. Consumer price inflation, which hit a 12-year high of 8.7 percent in February, fell to 4.6 percent in September. China cut interest rates on Wednesday for the third time in six weeks to help the world's fourth-largest economy ride out the reverberations of the global financial crisis. The government has also increased tax rebates for exporters of labour-intensive goods and lowered down-payments and mortgage rates for first-time home buyers. Infrastructure spending is also being ramped up. The government will closely observe the effects of such policy moves in coming months, seeking to lay a firm foundation for growth next year, Wen said. But he also said China's heavy dependence on exports may "increase the risk of external shocks," and he called for deeper reforms to ease trade surpluses. Yet even with global demand sagging, Wen said, inflation remains a long-term worry. China's combination of fast growth and low inflation in past years was exceptional and may not endure. "To judge from international experience, it is very difficult to maintain high growth and low inflation over the long term," he wrote. While international oil prices have fallen, they "remain fluctuating at a high level and inflationary pressures remain large," he added. "These unfavourable factors have already and will continue to affect our country," he wrote. "Price pressures have not fundamentally eased, and supply and demand for coal, power, oil and transport remain tight." (Reporting by Chris Buckley; Editing by Lincoln Feast) Keywords: CHINA ECONOMY ([e-mail]; [phone]) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved.

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