* Sees economic growth 8-9 pct, inflation under 5 pct
* Remarks less sanguine than those he made on Friday
* Many analysts had said 4 pct target was beyond reach
* Economists have predicted further rate rises this year
By Victoria Bi and Donny Kwok
HONG KONG/BEIJING, June 27 Chinese Premier Wen
Jiabao signalled for the first time that China would struggle to
meet its 4 percent inflation target this year, underlining
expectations that interest rates will rise further even as
economic growth slows down.
Wen, who is travelling in Europe, was quoted by Hong Kong
media on Monday as saying that while he sees the Chinese economy
growing above 8-9 percent this year, it was hard for China to
keep inflation under 4 percent in 2011.
"China's financial situation will still be among the best in
the world this year, with economic growth kept above 8-9
percent, and CPI controlled under 5 percent," Wen told Hong Kong
television media during the England leg of his Europe tour.
Wen's latest comments sounded somewhat less sanguine than
his remarks on Friday, when he said China's inflation was firmly
under control this year and should cool steadily. However, they
may not alter investors' thinking about monetary policy.
Many economists had assumed China would overshoot its 4
percent target given that the inflation rate has stayed well
above that mark since January, and is expected to peak at 6
percent in June or July.
Inflation rose in May to a 34-month high of 5.5 percent.
Economists polled by Reuters in June predicted China would
stay in a tightening mode, raising its benchmark lending rate by
one-quarter of a percentage point and its deposit rate by a
half-point this year.
Investors are watching carefully to see whether Beijing can
ease inflation without stifling growth. A string of
disappointing readings on factory activity and exports raised
concerns that China's economy may be slowing down more sharply
Copper prices lost ground on Monday in part because of
concern that inflation pressures may prompt top buyer China to
tighten credit further.
A sharper China slowdown would be particularly damaging for
global growth now that the U.S. economy looks shaky and Europe
is mired in a sovereign debt mess.
China is keen to keep prices in check to preserve social
stability. Food and energy prices have been the primary culprits
behind the steep inflation rate, and that tends to hit
lower-income households the hardest.
STAYING THE COURSE
Judging by a recent stream of comments from Beijing, the
market's bias toward tighter policy in China appears to be in
step with that of the Chinese government.
Vice Premier Li Keqiang said on Saturday that fighting
inflation was still China's top priority, effectively rebutting
arguments among some investors that China could face a hard
landing if it over-tightens when growth is already slowing.
Wen also took a stab at worries that China's economy risks a
hard landing on Friday when he said China is "fully capable" of
keeping its economy growing briskly.
Writing in an opinion piece in the Financial Times, Wen
said: "There is concern as to whether China can rein in
inflation and sustain its rapid development. My answer is an
The economy grew 10.3 percent in 2010 and in the first
quarter that pace eased to 9.7 percent.
China's central bank has made clear that its focus is
squarely on inflation.
It raised banks' required reserve ratio to a record 21.5
percent earlier this month, hours after the May inflation data
was released. The higher reserve ratio means banks have less
money available for lending, which policymakers hope will help
to cool growth and inflation.
(Reporting by Victoria Bi and Donny Kwok in HONG KONG, Koh Gui
Qing in BEIJING; Writing by Emily Kaiser; Editing by Neil