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China premier says little room for policy stimulus - media

BEIJING (Reuters) - China has limited room to use government spending and policy stimulus to boost its economy, China Premier Li Keqiang was quoted as saying on Wednesday, dashing hopes among some investors that Beijing may take steps to foster growth.

Li was quoted in the state-owned China Securities Journal as saying that though the economy faces considerable headwinds and uncertainty, China should allow market forces to do their work.

"If there in an over-reliance on government-led and policy driven measures to stimulate growth, not only is this unsustainable, it would even create new problems and risks," Li was quoted by the paper as saying indirectly.

His remarks were made at a meeting of the state council, or China's cabinet, on Monday after a series of data showed a recovery in the world's No. 2 economy faltered in April.

Monday's data, which showed growth in factory output and investment was softer than expected last month, stoked hopes among some investors that China may seek to lift activity through pump-priming.

However, some analysts have sought to downplay expectations of any policy relaxation by China, saying the government would likely be reluctant to act unless growth slumps by a greater extent.

Within China, government academics say policymakers are torn between managing short-term benefits and long-term needs. Some say Beijing should act and boost growth now, while others say it should hold off and focus on restructuring the economy for the long haul.

China wants to grow its economy by 7.5 percent this year, a target most analysts believe would be attained, though some have slashed their forecasts down towards 7.5 percent from initial predictions closer to 8 percent due to fragile economic conditions.

Bank of America-Merrill Lynch, for instance, reduced on Wednesday its 2013 growth forecast for the Chinese economy to 7.6 percent, from 8 percent previously.

(Reporting by Koh Gui Qing; Editing by Kim Coghill)

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