Barely a week into the new year and yet China is already bracing itself for a difficult first quarter 2012 on weakening exports, no thanks to the continuing mad financial crisis affecting its major export market, the eurozone.

As such, monetary policies will be fine-tuned as needed, Chinese Premier Wen Jiabao said. All these meant to expand domestic demand in an effort to offset the effects of crises in the U.S. and Europe.

"We see downside pressure on our economy and elevated inflation at the same time," Wen said during a two-day trip to Hunan Province, according to a statement on the government's website on Tuesday. "We also face problems of weakening external demand and rising costs for companies."

"The first quarter of the year may be quite difficult," Wen said.

Economists said the central bank will slash lenders' reserve requirements before the weeklong Chinese New Year holiday that starts on Jan. 23. It will be the second reduction since 2008.

Slowing demand from overseas plus the rising cost of maintain domestic business operations both added fire to the already complicated situation. Beijing has been anxiously on its toes, 24/7, fighting to avert a sharp slowdown, at the same time trying to combat inflation, which hit a more than three-year high of 6.5 per cent in July.

China is shifting focus to supporting growth rather than damping inflation as the eurozone's debt crisis threatens to curb exports.

China's economy grew an estimated 9 per cent or more last year, the official Xinhua News Agency reported. It was slower compared in 2010 when annual growth registered more than 10 per cent.

Beijing's economy is expected to grow slower this year.

"The government is closely monitoring the downside risks to growth," Chang Jian, a Hong Kong-based economist, said in Bloomberg News. "With an expected deceleration in property investment and exports, we expect to see more weakness in industrial activity."