China confident on economy, guarding risks: official

HONG KONG (Reuters) - China is confident it can overcome the economic crisis, but ongoing uncertainties mean the authorities must be on guard against risks, including inflation, a top official with the country's state planner said on Monday.

The comments by Liu Tienan, vice chairman of the National Development and Reform Commission, largely echo similar ones made in recent weeks by Premier Wen Jiabao, striking a fine balance between optimism and caution on the outlook for the world's third-largest economy.

"China's economy is at a crucial time of recovery. Stability is the foremost task in front of us," Liu told a forum in Hong Kong. "We should guard against all sorts of risks including inflation."

Liu pointed to an increase in production in recent months as one sign the economy was stabilizing.

Industrial output in August rose 12.3 percent from a year earlier, its fastest pace in 12 months, while power generation hit a record high and government revenues accelerated sharply.

Such strong figures have contributed to a growing consensus among economists that Beijing's target of 8 percent gross domestic product growth this year is well within reach. GDP rose an annual 7.9 percent in the second quarter.

However, a spike in lending and money supply growth has also contributed to fears that inflationary pressures could reemerge down the road, even though the consumer price index has seen negative annual growth for the last seven months.

Liu also said Beijing would focus on restructuring its economy in the long run, so as to reduce its reliance on exports and investment and be driven more by domestic consumption, bringing greater stability to the economy.

To that end, he said Beijing should improve the distribution of wealth, including by increasing the wages of lower income groups in both urban and rural areas, by improving public services and making sure more retirees are covered by pensions.

Strong growth would expedite such restructuring, Liu said.

Such efforts at rebalancing are coming increasingly into focus, as highlighted by a U.S. proposal for addressing global imbalances unveiled at the Group of 20 summit last week, to which Beijing gave its qualified support.

(Writing by Jason Subler, Editing by Jacqueline Wong)