BEIJING: President Hu Jintao has warned that China's competitiveness and trade strength are being threatened by a sustained global economic downturn, testing the grip of the ruling Communist Party.

Mr Hu made the warning at a Saturday meeting of the Politburo, the party's 25-member elite council, which dwelt on the challenges China faces as export demand slows, forcing companies to shed workers, the Xinhua news agency reported late that day.

His blunt words suggested China sees no quick end to worsening conditions, which last week led a state think- tank to forecast annual growth will slow to 8 per cent this quarter from 9 per cent in the third quarter, the lowest level in more than five years.

That is a skid close to the minimum 7 per cent that officials see as safe for maintaining social stability. China posted a scorching-hot 11.9 per cent growth rate last year.

'In this coming period, we will starkly confront the effects of the sustained deepening of the international financial crisis and pressure as global economic growth clearly slows,' Mr Hu told the senior officials.

The slowdown is 'clearly reducing external demand and exerting pressure to steadily weaken our country's traditional competitive advantages', he said.

'Under current conditions, we must keep an even tighter focus on economic development,' he added.

His comments are the latest in a string of official warnings about the country's once breathless growth record, and Mr Hu stressed the potential problems are social and political, as well as purely economic.

China has seen a rash of local protests over factory closures, especially in its once booming coastal export zones.

'Whether we can turn this pressure into momentum, turn challenges into opportunities, and maintain steady and relatively fast economic development...is a test of our party's capacity to govern,' said Mr Hu, who is also party chief.

The Politburo meeting was a 'collective study' session on Mr Hu's keynote policy of a 'scientific outlook of development' - seeking to replace a single- minded focus on GDP growth with a more balanced one also addressing equity and environmental sustainability.

He also said greater effort should be made to raise living standards, use resources more efficiently and develop rural and urban areas.

The government unveiled a 4 trillion yuan (S$885 billion) fiscal package last month to counter the impact of the global financial crisis, though it is still unclear how much will be new spending.

Beijing reportedly plans to spend 18 trillion yuan next year alone, using the country's immense capital to build railways, roads, airports and electricity networks.

The central bank last week announced its biggest cut in interest rates since the 1997 Asian financial crisis.

But bucking the gloom, an economist at a major think-tank attached to the Cabinet told the Xinhua news agency that the domestic spending boost could maintain economic growth at 10 per cent next year.

'Personal income continues to increase as millions of migrant workers flow into the city to get their lives improved. Enlarging demand for houses and autos will form huge and lasting consuming power,' said Mr Zhang Liqun of the Development Research Centre.

REUTERS, ASSOCIATED PRESS, AGENCE FRANCE-PRESSE