Chinese people celebrated another year of achievements Friday when they marked the 61st anniversary of the founding of the People's Republic of China with pride and passion.

China's second unmanned lunar probe, Chang'e-2, was launched on the October 1 National Day holiday, capping a year that has seen the nation become the world's second-largest economy and host to the biggest and most popular World Expo.

In downtown Beijing, more than 150,000 people -- many wearing traditional costumes of different ethnic groups -- from across the country gathered in the Tian'anmen Square to watch a grand flag raising ceremony early Friday.

President Hu Jintao, Premier Wen Jiabao and other leaders laid flower baskets at the Monument to the People's Heroes on the square Friday to pay their respects to those who sacrificed their lives to build the nation.

Sangye, an ethnic Tibetan, came to Tian'anmen to watch the flag-raising ceremony from his hometown of Yushu, in the northwestern Qinghai Province, where a devastating earthquake left thousands dead in April.

"The whole nation offered to help us when the quake struck. I came here to express my heart-felt appreciation for the motherland," he said.

In Shanghai, the China National Pavilion Day was celebrated at the World Expo.

"We will build a moderately prosperous society at a higher level by 2020 to benefit our over 1 billion people, and will realize modernization by the middle of this century," top Chinese legislator Wu Bangguo said when addressing the celebration ceremony.

The first World Expo ever hosted by a developing country, the Shanghai event has drawn participants from 246 countries and international organizations, more than 100 foreign leaders and almost 60 million Chinese and foreign visitors in the past five months.

"You have achieved new records -- a record number of participants, a record number of visitors -- and you have built the largest site ever," Vicente Loscertales, secretary-general of the International Expositions Bureau said at the ceremony.

Many other Chinese cities also organized flag raising functions to mark the National Day Friday, the first day of the "golden week" holiday when millions of people travel for family reunions and holidays.

Also Friday, the launch of Chang'e-2 lunar probe from the southwestern Sichuan Province ignited the patriotic passion all over China, which became the third nation to send a man into space in 2003.

"I feel very proud today," said Sarentuya, an ethnic Mongolian resident of Alxa League, north China's Inner Mongolia Autonomous Region.

"In the past, China's Shenzhou spacecraft have blasted off from my hometown. Today, I will see the Chang'e lunar probe launched from another corner of the country. I believe the Chinese will eventually land on moon," he said. CHALLENGES AND PRESSURE

Although China has overtaken Japan as the second-largest economy and is the holder of the world's largest foreign exchange reserves, it is still a developing country and its per capita income ranks 98th in the world, ahead of El Salvador and behind Albania.

Major problems China still faces include an unbalanced economic structure, weak capabilities for scientific and technological innovation, rising resources and environmental constraints, uneven urban-rural and regional development and lack of coordination between economic and social development, Premier Wen Jiabao said last month at the World Economic Forum's annual Summer Davos meeting in Tianjin.

China also facing the challenges of climate change, energy efficiency and emissions reductions, although government officials have said the country would likely reach its goal of improving energy efficiency by 20 percent from 2006 to 2010.

In some industrial areas, lives were seriously affected last month as factories, homes, hotels and shopping malls reportedly experienced rolling blackouts and power cuts to meet energy-saving targets.

Today in China, the widening gap between the rich and poor has led to social problems and even conflicts. Tens of millions of people in the countryside still live in poverty and many young white-collar workers in big cities cannot afford skyrocketing housing prices.

Later this month, the 17th Central Committee of the Communist Party of China (CPC) will hold its fifth plenary session in Beijing to discuss the formulation of China's 12th Five-Year Program (2011-2015), and the next five years are considered a key period to build a moderately prosperous society.

"In the near future, I hope the central authorities can do more to rein in real estate prices and curb speculation in this regard to enable low-income residents to have their own homes," said 35-year-old Shi Wenjie, a university teacher in Beijing, who lives in a rented apartment with his wife and young son.