China Sees Bright Spots In Slowing Economy, Vice Premier Says

BEIJING (Reuters) - China's economy faces increased downward pressure this year but the slowdown is stabilizing, with employment and services among the bright spots, Vice Premier Zhang Gaoli said on Sunday.

Weighed down by a property downturn, factory overcapacity and local debt, China's economic growth is expected to slow to a quarter-century low of around 7 percent this year from 7.4 percent in 2014, despite expected additional stimulus measures.

The central bank has cut interest rates twice since November, on top of a cut in bank reserve requirements in February, amid concerns about growing deflationary risks, and more such moves are expected.

In addition, the government plans to run its biggest budget deficit in 2015 since the global crisis to support spending.

"The downward pressure on China's economy increased somewhat since the start of this year," Zhang told a high-level conference in Beijing.

But while growth in industrial output and investment continued to slow, the government sees some signs of the slowdown stabilizing, he added.

"There are also bright spots; for example, employment, services, high-tech industries, new industries, private investment and innovations," he added.

Zhang reaffirmed that the government will step up its pro-active fiscal policy and keep monetary policy "not too tight and not too loose", while paying more attention to targeted adjustments to help support growth.

"It's impossible and unnecessary for us to maintain the high-speed growth seen in the past," he said, adding that China had paid a price for the breakneck growth of previous years.

With pollution now one of the government's top concerns, Beijing is trying to restructure industry to prevent further environmental damage and clean up the country's filthy air.

Zhang said China must focus on improving quality and efficiency, change its models and adjust structures to adapt to slower economic growth while also facing the challenge of a weak global economic recovery.

Beijing is also paying close attention to risks that increase during such periods of slower growth, including financial risk and local government debt, added Lian Weiliang, vice head of China's chief economic planner, the National Development and Reform Commission.

"We have the ability ... to achieve steady economic growth on condition that risks are effectively controlled."

(Reporting by Kevin Yao. Writing by Dominique Patton; Editing by Clarence Fernandez)