China vows stable growth in face of global turmoil

BEIJING (Reuters) - China will maintain flexible and prudent macro-economic policies and seek to expand domestic demand in the face of a grim international economic environment, the country's ruling Communist Party said on Sunday.

A meeting of the Party's Central Committee warned that the global economy was slowing, threatening to dent Chinese growth, and said the country would be turning to home markets to cushion the fallout.

"There are also some pronounced contradictions and problems in domestic economic activity. We must enhance our sense of peril and actively respond to challenges," according to a communique issued after the meeting by the official Xinhua news agency.

At the same time, it said the party's top leaders had stressed that the overall state of the Chinese economy was good.

Growth had remained quite fast, and the financial sector was operating in a stable, healthy way.

"The fundamental conditions of our country's economic development have not changed," the communique said.

Thanks to capital controls and an underdeveloped, inward-looking banking system, China has been largely sheltered from the global credit crisis.

But economists and policy makers are braced for second-round effects as slowing exports hit manufacturers and cause loans on the books of the nation's banks to turn sour.

"The most important thing is to handle our country's own affairs well," the communique said.

It said the government would "maintain economic stability, financial stability, and stability of the capital markets ... continuing to encourage economic and social development that is both healthy and rapid."

The central bank has already cut interest rates twice to support growth, and economists expect more monetary easing as well as a relaxation of fiscal policy to prop up domestic demand.

The meeting approved a raft of measures, including land reforms, intended to boost the incomes and farmers of China's 750-million strong farming population, but the communique did not go into detail.

(Reporting by Chris Buckley; Editing by Alan Wheatley)