Official eyes domestic demand to weather industrial slowdown

BEIJING - A government official on Wednesday warned of risks in China's industrial sector, saying weak external demand and increasing financing difficulties should not be underestimated.

"We need to pay more attention to the possibility that the economy might weaken further," Zhu Hongren, chief engineer at the Ministry of Industry and Information Technology, said at a regular press conference.

Zhu said China's industrial slowdown was a result of slack external demand and domestic macroeconomic control policies, adding that the deceleration was within expectations.

China's industrial value-added output grew 11.6 percent year-on-year in the first quarter of 2012, marking the slowest expansion since July 2009, according to figures released by the National Bureau of Statistics.

Zhu said the industrial sector, particularly small- and medium-sized enterprises, are still facing rising costs and difficulty accessing financing.

Overcapacity is a significant problem for Chinese manufacturers, many of whom are still struggling at the lower end of the international value chain as a result of their failure to innovate, he said.

"Still, we have seen some positive signs in the global economy and economic recovery in the US has picked up momentum," Zhu said.

He estimated that fixed-asset investment in the telecommunications sector will top 500 billion yuan ($79.36 billion) this year amid the country's efforts to upgrade its optical fiber networks and offer greater bandwidth to Internet users.