Dec. 18 (Bloomberg) -- Chinese President Hu Jintao said the world??s fourth-largest economy can expand quickly enough for the nation??s 1.3 billion people to become wealthy by 2049, in a speech that highlighted the political challenge of China??s slowing growth as much as it did 30 years of market reforms.

Amid a list of achievements, Hu acknowledged the difficulties facing China, including lagging productivity and a lack of innovation, and called repeatedly throughout his remarks for greater government accountability and focus on serving the public.

Today??s celebration of China??s decision to embrace a capitalist economic system coincides with sputtering economic expansion that is a serious concern for a government whose justification for one-party rule is tied to delivering greater prosperity. The $3.3 trillion economy is 68 times larger than in 1978, when former leader Deng Xiaoping began the reforms.

??China??s growth needs the world, while the world can??t grow without China,?? Hu said in a 93-minute speech to Communist Party cadres at the Great Hall of the People in the center of Beijing. ??Our development model must be sustainable, our focus must be to lift the standard of living of the people, ensure social equity, stability and harmony.??

The government faces a difficult year in 2009 as the global recession deepens and a cooling domestic economy endangers social stability. Growth may slip to 5 percent or less, some economists forecast, before a 4 trillion yuan ($585 billion) stimulus package can revive expansion.

??Quite Tense?? 2009

??The year to come is going to be quite tense,?? said Jean-Philippe Beja, senior researcher at the Paris-based Centre National de la Recherche Scientifique and the French Centre for Studies on Contemporary China in Hong Kong. ??If you base your legitimacy on delivering improvements in the economy and in living standards, then when you have an economic slowdown you have a problem.??

Imports and exports fell in November, inflation cooled and industrial production grew at the slowest rate since at least 1999. Home sales fel1 20.6 percent in the first 11 months while China??s benchmark stock index plunged 63 percent this year. Central bank Governor Zhou Xiaochuan said on Dec. 16 that he may add to the steepest interest-rate cuts in 11 years.

??Paradigm Shift??

??Global events and our own domestic troubles demanded a paradigm shift and a transformational rethinking by the Communist Party,?? Hu told an audience that included former president Jiang Zemin and former premier Zhu Rongji. ??In the past 30 years, we have overcome challenges, from the breakup of the Soviet Union to facing down global sanctions, from the Asian financial crisis to the current global crisis.??

China??s shift to a capitalist system started when Deng approved an experiment that gave peasants the right to farm their own land. The changes initiated by the former revolutionary leader have supported growth averaging 9.9 percent for the past three decades. China became a World Trade Organization member in 2001, helping its economy become the world??s largest exporter of appliances, textile and consumer of raw materials. The nation hosted the Olympic Games in August, sent astronauts into space and is aiming to land a man on the moon by 2020.

Hu today emphasized that citizen??s empowerment is the key to continued development.

??Without democracy, there can be no socialist modernization,?? he said. ??People??s democratic right to be masters of their own affairs are the essence.??

Unstoppable Expansion

A government exhibition this week in Beijing to mark the 30th anniversary chronicles what had seemed to be an unstoppable economic expansion of the world??s most populous nation.

A 25-meter wall of bar graphs on everything from rural income to currency reserves move in one direction: ever more steeply higher. A room of scale models displays Shanghai??s Pudong district bristling with uber-modern skyscrapers alongside the new development zone in eastern China??s Tianjin, where miniature Airbus SA planes circle a model port. Row after row of factories are blazoned with the names of international companies.

As the economic slowdown intensifies, the focus evidence points to rising social tensions and social instability. Unemployment may reach 9.4 percent by year-end, the state-backed Chinese Academy of Social Sciences said in an annual report this week. The government??s target for urban registered unemployment is 4.5 percent for this year. Labor disputes are on the rise, with local governments in parts of eastern and southern China seeing a tripling of cases, according to the report.

Beja said 2009 will be ??a dangerous year?? because it marks key moments in a country with a long history, where anniversaries are significant. Next year will be the 20th anniversary of the 1989 Tiananmen Square crackdown on student demonstrators and the 10th year of a brutal campaign against the Falungong sect.

??In the recent history these have always been problematic for the leadership,?? Beja said.