China faces increased economic risks in second half: state planner

BEIJING (Reuters) - China's economy is facing increasing risks in the second half of the year and policymakers need to step up efforts to hit key development goals, the head of the state planning agency warned, as U.S. trade tensions intensify.

"Targets in economic growth, employment, inflation and exports and imports can be achieved through effort," He Lifeng told the standing committee of the National People's Congress on Tuesday, according to a statement on the National Development and Reform Commission's (NDRC) website.

"But to achieve growth goals in consumption, outstanding total social financing and urban disposable income will require bigger effort."

Weighed down by rising financing costs, China's economy was already starting to cool even before the trade dispute with Washington escalated, with investment growth at a record low and consumers turning more cautious about spending.

Beijing is speeding up infrastructure spending and offering help to smaller companies to prevent a sharper slowdown, though policymakers are wary of adding to a mountain of debt that was fueled by past stimulus binges.

Spurring domestic demand is a priority as exports are likely to weaken sooner or later, but rising property prices are adding to household debt and leaving consumers with less to spend. Disposable income in China is also growing at a softer rate.

Policymakers have set a 10 percent growth target for retail sales for the full year, the same as in 2017, but that level has only been reached in one month so far this year. Sales growth in the last few months has been the softest since 2003.

"There are greater headwinds in the second half this year with some targets under threat," said Julian Evans-Pritchard, Senior China Economist at Capital Economics. "But I don't get from today's statement that they have decisively moved to the easing direction."

"I don't think the tension between the two goals - one is the deleveraging campaign, the other is meeting the economic growth target - has been resolved yet."

STRUCTURAL CHALLENGES

NDRC chief He attributed the increasing difficulties to both long-term structural challenges in the economy and external risks.

On trade, He said China should look to diversify its export markets and boost imports.

U.S. and Chinese officials ended talks last week with no major breakthrough and another round of tit-for-tat tariffs kicked in. Washington is expected to impose even more sweeping punitive measures in late September.

He also said China will continue its multi-year campaign to reduce financial risks and curb debt but will control the pace and intensity of such efforts, echoing a central bank pledge that the country won't resort to strong stimulus this time to prop up growth.

He also said safeguarding employment remained a priority.

China's urban survey-based jobless rate rose to 5.1 percent in July from 4.8 percent in June. The government aims to keep the rate below 5.5 percent this year.

He also said authorities are closely watching price changes and the supply of important goods for any impact on consumers.

"China is determined to resolve problems with the property market... and resolutely curb rises in property prices," he said.

(Reporting by Stella Qiu and Beijing Monitoring Desk; Editing by Sam Holmes and Kim Coghill)