The world's third largest economy grew 10.3 percent in the second quarter, compared with 11.9 percent in the first three months, as government tightening measures started to bite, the People's Bank of China (PBoC) said in a statement on its website.

But the economic slowdown will level off and is in fact beneficial for the restructuring of the country's economy and ensuring sustainable growth, it said, adding: "China's economic fundamentals are still very good."

"It is likely the economic slowdown will stabilise in the future, but the chance of a double dip is not likely," the central bank said.

Policymakers will stand by current macroeconomic policies, such as those aimed at cooling the property market and reining in rampant bank lending, because the economy is moving in the "expected direction", it added.

The bank said the European financial crisis would have an impact on China's exports in the near-term, given the region is China's largest trading partner, but the effect on the overall economy would not be significant.

"Even though exports to Europe will weaken in the short term, there is low risk of the crisis having a serious impact on the Chinese economy," the PBoC said.

The bank's comments come after Premier Wen Jiabao said earlier this month that the slowdown in the second quarter was in line with expectations, but warned of economic difficulties ahead.

"So far this year our nation's economy is continuing to develop in the direction set by our macroeconomic controls," Wen said, according to a report on his government's website.

"The progress made has not come easy. Faced with the current situation, we must ... fully anticipate the difficulties and problems ahead and strengthen our awareness of the dangers."

related report
China local govt debt facing 'serious' default risk: report
Nearly a quarter of the 7.66 trillion yuan (1.1 trillion dollars) that Chinese banks lent to local governments is "at serious risk of default", a report said.

Chinese banks lent huge amounts of money to provincial financing vehicles for construction projects after Beijing called for nationwide efforts to spur the economy.

But now only 27 percent of projects financed by the loans are generating adequate cash flow for repayment, the Century Weekly said in its latest issue, citing the China Banking Regulatory Commission.

And 23 percent of the loans -- or about 1.76 trillion yuan -- face serious default risks, said the report.

The banking regulators, along with the banks that have the biggest exposure, will carry out detailed discussions with local governments starting in September about how to recoup the loans, the report said.

A spokeswoman at the banking regulator, which was also cited in a report on the issue by the Financial Times newspaper, declined to comment on the report when contacted by AFP.

China has powered out of the global crisis on the back of a stimulus package worth four trillion yuan and the state-backed bank lending, which saw new loans nearly double from the previous year to 9.6 trillion yuan in 2009.

The lending spree raised concerns in Beijing over a possible new crop of bad loans that could threaten the world's third-largest economy.

The State Council, or cabinet, warned earlier this year about the risks of lending to financing vehicles set up by local authorities to fund new roads, bridges and other projects.

Lending to such entities represented about 18 to 20 percent of total loans in the banking system, rating agency Standard & Poor's said last week.

"It's highly likely that some of these loans will turn bad over the next few years, given the questionable credit quality of many of the borrowers," said Liao Qiang, a Beijing-based analyst at Standard & Poor's.

The roughly 1.76 trillion yuan at risk of default would be nearly four times the amount of all non-performing loans in Chinese banks as of the end of June, according to figures released by the bank regulator.

del.icio.us	Digg	Reddit
YahooMyWeb	Google	Facebook

Memory Foam Mattress Review

SPACE MEDIA NETWORK PROMOTIONS Solar Energy Solutions Tempur-Pedic Mattress Comparison ... Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News