THE Chinese government yesterday applauded itself for leading the world out of the financial crisis, after a "truly extraordinary and inspiring" year.

The annual work report to the legislature by the Premier, Wen Jiabao, focused on China's sudden economic and political ascendancy.

"Our economy was the first in the world to have made a turnaround," he said. "Events again proved that no difficulties or obstacles can impede the course of the great rejuvenation of the Chinese nation.

"The past year was truly extraordinary and inspiring and raised China's international standing and influence."

The confident message contrasted with more humble presentations in previous years.

Mr Wen lightly touched on political reform challenges but did not match the personal commitments to the constitutionalism and the rule of law that he made in an internet exchange last weekend. His report was more about confirming the legitimacy of one-party rule.

The success of reconstruction work after the Sichuan earthquake ''fully reflects the boundless love of the Chinese nation and powerfully demonstrates the incomparable superiority of the socialist system'', he said.

Budget documents released yesterday showed China's world-leading growth last year was fuelled by a 21.2 per cent increase in government spending and leveraged by an even larger government-directed increase in bank lending.

The spending and credit boom contributed to China building or upgrading 380,000 kilometres of roads, 266,000 kilometres of electric power lines and 35 civil airports and producing 13.6 million vehicles, budget documents said.

But the spending and construction boom has strained the economy and will not be repeated this year, as inflation and other risks rise.

The draft 2010 budget said spending growth would slow sharply to 6.3 per cent, and there have been a series of measures this year to slow runaway growth in lending.

An employment crisis at the start of last year has swung into the challenge of finding enough new workers.

"There is a structural shortage of labour," Mr Wen said.

He also warned that "latent risks in the banking and public finance sectors are increasing".

And he acknowledged that a proportion of last year's government largesse had found its way into new government office buildings and "model" projects that look good for visiting dignitaries but do little to assist the people.

"We must prevent the construction of image and vanity projects that waste manpower and money in the name of boosting domestic demand," he said.

Mr Wen said new projects would need to be "strictly controlled", although "we need to ensure projects are not stopped midway".

And he acknowledged a growing chorus of critics who say last year's mammoth spending drive set back economic reform.

"We urgently need to transform the pattern of economic development," he said.

"We will break industry monopolies, remove regional blockades, support superior enterprise in acquiring ones in financial difficulties."

But he disappointed many overseas observers by vowing to keep the exchange rate "basically stable" despite rising pressure from US, European and even South-East Asian governments.