Premier Li Keqiang said on Saturday that China's economic growth remains stable, although "complicated factors are rising".

He said growth of the world's second-largest economy since the beginning of the year is "still at a relatively high and rational range, especially given the stable employment situation".

"The key is innovating macroeconomic control and releasing the vigor of the market," Li told provincial-level leaders of the Bohai Economic Rim region at a meeting in Hebei province. "Reforms will be deepened to unleash the potential of consumption and private investment."

He said government expenditure will be constrained to ensure spending on livelihood projects. Meanwhile, bank loans will be diverted to stimulate the real economy, while industries with notable overcapacity will be divested to provide a boost to advanced industries.

Li added the State Council is studying plans for the economic progress of the Bohai Sea area and aims to develop it into a new engine for the country's growth and transformation.

China's GDP grew 7.9 percent in the fourth quarter of last year, ending a slowdown for seven quarters. But the growth dropped again to 7.7 percent year-on-year in the first quarter of this year.

Meanwhile, May exports grew 1 percent from a year earlier, the slowest pace in the past 10 months, the General Administration of Customs said on Saturday. Imports in May edged down 0.3 percent year-on-year (in contrast to a 16.8-percent increase in April) for a trade surplus of $20.43 billion.

Foreign trade in May rose 0.4 percent year-on-year, while the first five months of this year saw China's trade gain 10.9 percent year-on-year to $1.68 trillion, with exports up 13.5 percent year-on-year, and imports up 8.2 percent yielding a trade surplus of $80.87 billion, according to the customs agency.

Vice-minister of Commerce Zhong Shan said China faces "severe" challenges to maintain steady trade growth amid the world's slow economic recovery, according to a Saturday statement on the website of the Ministry of Commerce.

"External demand did not show clear improvement. China's traditional industries are losing competitiveness while global competition becomes fiercer. In addition, the trade environment should be further enhanced," Zhong said.

The remarkable slowdown of China's foreign trade in May was partly owing to "the fast drop of trade between the mainland and Hong Kong after curbs on arbitrage trading, as well as other factors including the country's eased economic expansion, weak external demand, high business costs at home, yuan appreciation and a worsening trade environment".

"The recent Japanese yen depreciation and the fast yuan appreciation against the US dollar also contributed to the export slowdown in May," said Chen Hufei, a researcher from the Bank of Communications, in a research note. "Exports in June will grow steadily and the whole year will see exports slightly better than 2012.

"But huge challenges remain in view of rising trade protectionism and the yuan appreciation driven by capital inflows."

China's exports to Japan declined 5.61 percent year-on-year in May from the 1.21-percent drop in April, while exports to the United States went down 1.63 percent year-on-year in May from the 0.11-percent drop in April.

Shipments to the European Union dropped 9.74 percent year-on-year in May, compared with the 6.47-percent decrease a month earlier, Chen said.

"The import decline in May suggests sluggish domestic demand amid the weak steam of China's economic growth. The whole year will see imports grow about 10 percent as the government expands imports to rebalance foreign trade," Chen added.

Fan Gang, director of China's National Economic Research Institute, said during the Fortune Global Forum in Chengdu: "China's economy is undergoing a soft landing and GDP growth in the second quarter will be better than that in the first, while export prospects this year will improve from last year."

lijiabao@chinadaily.com.cn

(China Daily 06/09/2013 page2)