ADB expects China economy to grow 8.5% to 8.9% through 2007

ADB expects China economy to grow 8.5% to 8.9% through 2007

BEIJING, April 6 Kyodo

China’s economy will grow 8.5 percent to 8.9 percent from 2005 through 2007, slowing down from 9.5 percent last year, the Asian Development Bank predicted Wednesday in an annual regional forecast.

The ADB said this trend would signal a ”soft landing” for the economy, which has grown steadily year by year amid threats of overheating.

As the government reduces public spending but consumer demand and investments remain strong, the nation’s gross domestic product will grow 8.5 percent in 2005, 8.7 percent in 2006 and 8.9 percent the following year, according to the ADB’s China Economic Outlook.

Investment will grow 15 percent to 18 percent, a decline from past 15 months, while manufacturing and construction will increase 9 percent to 10 percent, the outlook states.

Growth in manufacturing and construction will slow because of ”bottlenecks in energy and transportation, land constraints, and reduced levels of investment,” the bank said.

Export growth will slow to 12 percent to 20 percent and trail imports, according to the report. Export growth will slow because exporters’ costs are rising while demand is easing overseas, the bank said.

China also must cope with inflation as the prices of energy, utilities and real estate rise, the report says.

The ADB, which has lent money for 108 infrastructure and poverty alleviation projects in China since 1986, predicted that the growth trend through 2007 would signal a ”soft landing” — a gradual rather than sudden drop in economic growth.

”We will see the economy become stable then,” ADB senior economist Zhuang Jian said at a press conference.

The bank report attributed the expected soft landing to the government’s ”balanced development strategy” and macroeconomic control policies.

To help the economy land softly, the bank suggested that the government offer rural families free compulsory education to reduce their financial burden and reform its banking system.

Banking laws need better implementation and supervision to stop illegal practices, and the country should encourage more private banks, said Zhang Xuechun, ADB senior financial economist.

”The weakest point on banking is governance, and the ownership is unclear,” Zhang said. China’s four major banks are state-owned.

But China has met its World Trade Organization banking, securities and insurance commitments on schedule, the bank said. Over the past three years, it said, China has revised more than 2,300 national laws and regulations that would have conflicted with WTO rules.

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