China to press ahead with stimulus policies -Wen

China needs to stick firmly to its stimulus policies as the economy is at a critical stage on the road to recovery, Premier Wen Jiabao said.

Wen, whose comments echoed the conclusions of a cabinet meeting he chaired last Wednesday, was speaking during a weekend visit to northern Hebei province.

State media also quoted Wen as telling local officials and companies that China would maintain its active fiscal policy and moderately easy monetary policy.

At the same time, China needed to push ahead with reforms and upgrade the economy to create a springboard for future growth.

Beijing launched a 4 trillion yuan ($586 billion) pump-priming package last November in the teeth of the global financial crisis and has since unveiled plans to support the restructuring of 10 key industries.

The World Bank last week revised its GDP growth forecast for 2009 to 7.2 percent from 6.5 percent and advised Beijing that further fiscal stimulus was neither necessary nor appropriate.

The bank expects China's fiscal deficit to jump to 4.9 percent of GDP this year from 0.4 percent in 2008. It wants the government to keep money in reserve in case of economic weakness in 2010.

Zhang Tao, head of the central bank's statistics department, agreed in remarks published in the China Securities Journal that there was limited room for further adjustment of fiscal policy.

But Wang Qifan, executive vice mayor of Chongqing municipality, suggested in the same paper that China had leeway to issue an additional 1-3 trillion yuan in debt. This year's budget deficit is projected to total 950 billion yuan.

The government could also raise banks' statutory loan-to-deposit ratio to stimulate consumption, Wang said. Banks now may not lend out more than 75 percent of their deposits.

Also in the China Securities Journal, Wang Zili, an official from the central bank's graduate school, and Jia Kang, head of a Finance Ministry research institute, expressed concern that stagflation could take root as the impact of the government's policies gradually faded.

SHANGHAI/BEIJING, June 22 (Reuters)