(Reuters) - Chinese Premier Li Keqiang warned on Thursday that the economy faces "severe challenges" in 2014 - comments that came as weak data fanned speculation the central bank would relax monetary policy to support stuttering growth.
Li hinted Beijing would tolerate slower economic expansion this year while it pushes through reforms aimed at providing longer-term and more sustainable growth.
"We believe we have the ability, and all the means, to ensure that economic growth will stay within a reasonable range this year," he said.
He also signaled the government will allow further debt defaults after Shanghai Chaori Solar Energy Science and Technology Co Ltd failed last Friday to pay an interest payment on its five-year bonds.
The first default on a domestic bond was hailed by experts as a landmark that will impose more market discipline, a break from the past when bonds enjoyed an implicit guarantee because the government would bailout troubled firms to ensure stability.
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