Overcapacity

Amid increasing concerns of industrial overcapacity, Wen said the 1.18-trillion-yuan investment planned by the central government for 2009-2010 had not been and would not be spent on any industrial projects.

"The central government has spent 590 billion yuan this year mainly on affordable housing projects, infrastructure construction in rural areas, improving people's livelihoods, environmental protection, technological reform and building necessary infrastructure, such as the Beijing-Shanghai high-speed railway and major highway networks," he said.

"Industrial overcapacity has been a global issue, which fundamentally results from less demand and a shrinking market," Wen said.

In China, industrial overcapacity was also a result of the long-existing problem of an imbalanced economic structure, he said.

In October, 10 government departments jointly warned that China's economic recovery could be hampered by chaotic expansion, especially in the steel, cement, plate glass, coal chemical, polycrystaline silicon and wind power equipment sectors.

"To resolve the problem of overcapacity, the most important thing is to take economic, environmental, legal and, if necessary, administrative measures to eliminate outdated capacity and, in particular, restrict the development of high-energy-consuming and polluting industries with excess capacity," Wen said.

Sticking to pro-growth policies

Wen said China would maintain its pro-active fiscal policy and moderately loose monetary policy to buoy the economy in 2010 as many uncertainties persisted at home and abroad.

Averting the trend of falling global demand remained difficult, and "economies of some countries are starting to pick up, but fluctuations are still possible," Wen said.

"China's economy has been on track for recovery. However, the economic performance and operations of enterprises still mainly rely on support from government policies."

In November last year, the government shifted the fiscal policy from "prudent" to "pro-active" and the monetary policy from "tight" to "moderately loose" to expand domestic investment and demand to stimulate the economy.

"To withdraw macro-economic policies too early will likely ruin the efforts made before and reverse the economic development," Wen said.

However, his government would adjust macro-economic policies in line with the changing economic situation and study issues arising during implementation of such policies.

China would gear more investment to social welfare, technical innovation and energy conservation and emission cuts next year, he said.