China should succeed in cooling an overheated economy and achieve a soft landing, according to the Asian Development Bank's (ADB's) Asian Development Outlook 2004 Update, released on Wednesday. The report forecasts economic trends in Asia.

The ADB forecasts 8.8 percent growth in China's economy this year, slowing to about 8 percent in 2005.

The report indicates that the rapid pace of investment growth has slowed from the very high levels of the first quarter, reflecting the gradual impact of the government's tightening measures. However, the large amount of construction in progress means that growth in investment will remain high at 25 percent this year and 21 percent in 2005.

In the longer term, such high levels of investment cannot be relied on to drive economic growth.

The ADB expects inflation to moderate from a rate slightly over 5 percent recorded in mid-2004, and consumption is expected to increase 13 percent in 2005, supported by higher urban and rural incomes.

Exports are forecast to rise 22 percent in 2004 and 16 percent in 2005, based on expectations that world growth will be stronger in 2004 than in 2003 and that growth will be moderate in 2005. The ADB expects China to remain the leading destination for global foreign direct investment.

Imports will grow faster than exports, the bank said, adding that China's rapidly growing markets are providing opportunities for other countries, particularly in Asia.

However, higher global oil prices have introduced new uncertainties for economic prospects for 2004 and 2005, the bank said.

If oil prices remain at around US$40 a barrel from the second quarter of 2004 through the fourth quarter of 2005, GDP in 2005 will be 0.8 percentage points lower than forecast.

(China Daily September 23, 2004)