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ADB: China economy to slow moderately

By Zhu Qiwen (China Daily)
Updated: 2007-03-28 08:32

China's economic growth will moderate slightly in the next two years because of tight macroeconomic controls and government efforts to alter the growth pattern, the Asian Development Bank (ADB) said yesterday in its flagship annual publication.

The Asian Development Outlook 2007 predicts that the economy will grow 10 percent this year and 9.8 percent the next.

"The performance of the Chinese economy was exceptional in 2006 and will remain strong in 2007 and 2008," said Zhuang Jian, an economist at the multilateral development bank.

Rapid growth in exports and strong fixed asset investment helped deliver yet another year of double-digit growth of 10.7 percent last year.

The country's efforts to rein in galloping fixed asset growth are expected to gain more traction this year, the report forecasts.

The authorities have taken many steps to cool down the economy. For instance, the People's Bank of China, the central bank, has raised the base lending rate thrice from 5.58 percent to 6.39 percent and the reserve requirement five times from 7.5 percent to 10 percent in the past year to curb credit growth and investment expansion.

The National Development and Reform Commission and the State Environmental Protection Administration have raised energy efficiency and environmental requirements for investment.

However, recent monthly data are yet to show clear trends for industrial production and fixed asset investment, the ADB report points out.

Figures from the National Bureau of Statistics show that factory output in January and February combined grew 18.5 percent from a year earlier, compared to 14.7 percent in December and 16.2 percent for the first two months of 2006.

Meanwhile, growth in urban fixed-asset investment rebounded from about 20 percent in the fourth quarter last year to 23.6 percent for the first two months of this year.

"Progress was limited on most fronts," said Zhuang, "but difficulties in shifting the growth pattern will not be addressed overnight."

The ADB suggests that China strengthen the social security system, spend more on education, healthcare and rural development, and take more effective measures on energy efficiency and environmental protection.