BEIJING/FUKUOKA (Japan) - CHINA is aiming for growth of about 8 per cent next year but faces a host of challenges, a top official said on Saturday, as Premier Wen Jiabao agreed to beef up cooperation with North Asian counterparts to fight the global crisis.

Policy makers worldwide scrambled for fresh initiatives to stem the fallout from the biggest financial shock in 80 years, with the White House weighing emergency funding to avert collapse of the US auto industry and Europe agreeing to a 200 billion euro (S$399 billion) stimulus plan on Friday.

China's inflation to weaken further in December: senior official BEIJING - CHINA'S inflation will weaken further in December as the economy continues to slow, a key policy maker said Saturday, while also confirming next year's economic growth target will be eight percent. The producer price index, PPI, will retreat 'markedly' this month, increasing the possibility of deflation, said Liu Mingkang, chairman of China Banking Regulatory Commission, according to Xinhua news agency. ... more

China has already earmarked almost US$600 billion to maintain growth as the crisis, which started in the US mortgage lending market last year, spreads to all parts of the globe.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said potential problems facing the world's fourth largest economy included falling prices and, after years of attracting vast sums of offshore funds, capital outflows.

'China's economic and financial situation merits no optimism and Chinese banks will face stern challenges in 2009,' he told a financial conference in Beijing.

'If China's GDP growth rate falls to 6 or 7 per cent, the quality of development would be seriously impacted.'

That pace of expansion, though it would still be the envy of most countries, would endanger social stability in China as it would be hard to create enough jobs for the millions of people moving to cities from farms every year, he said.

Mr Liu also said the country was headed for deflation after both consumer and producer price rises slowed sharply last month.

Producer inflation, which slumped to 2.0 per cent growth in the year to November from a 6.6 percent reading in the previous month, was set to weaken markedly again in December, he said.

'The possibility of moving to deflation from inflation has greatly increased,' he said.

North Asia summit
In the southern Japanese city of Fukuoka, China's Wen, Japanese Prime Minister Taro Aso and South Korean President Lee Myung-bak confirmed the importance of steps to expand demand in their struggling economies, pledged not to create new trade barriers over the next 12 months and backed efforts to bolster a regional web of currency swaps.

At a historic summit, the leaders vowed to work more closely together, setting aside decades of rivalry and animosity between the three neighbours.

'Cooperation between...our three countries to overcome difficulties will have real significance as the financial crisis has a big impact on economies around the world,' Mr Wen said.

Major concerns about the US auto industry remained after US President George W. Bush failed to persuade senators in his own party to support a US$14 billion auto bailout.

The White House warned that the US economy could not withstand an auto collapse and said it might provide emergency funding from the US$700 billion financial bailout fund known as TARP.

Even without the prospect of an industry-damaging bankruptcy at one of the major US automakers, Japanese peer Toyota Motor Corp was likely to post an operating loss of about $1 billion in the six months to March, Japanese media reported. -- THOMSON REUTERS