The Organization for Economic Cooperation and Development (OECD) has predicted that Chinese economic growth will slow to 8 percent in 2005 as a result of restrictive economic policies.

According to the OECD, the restrictive government credit policy to companies will do little to slow production as "companies appear to have found ways to moderate the impact of the administrative actions and output growth has recovered sharply."

However, the OECD predicts that the value of oil imports will climb almost 2 percent of GDP between 2003 and 2005. This, in addition to a restrictive economic policy, is likely to lead to a slowdown in production growth.

The organization said the tiny interest rate hike at the end of October will have little impact.

It forecasts continued moderate inflation to result from higher food and raw materials prices, putting the figure at 4.0 percent in 2005 and 2006 compared with 4.2 percent this year.

The OECD added that China will remain competitive owing to its stable exchange rate, flat unit labor costs and the removal of textile quotas next year.

It noted that an abrupt slowdown in bank lending had "disrupted the provision of working capital and could lead to a greater than expected rundown in inventories and hence output, which might set off downward revision of industrial investment plans."

(Xinhua News Agency December 1, 2004)