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ADB Says China's Economic Growth to Slow

The Asian Development Bank (ADB) predicts that the growth of the Chinese economy will wind down for the rest of the year to produce an annual growth rate of 8.3 percent.

In its Asian Development Outlook, which was released Wednesday, the bank also said the growth rate is likely to decline a bit further to 8.2 percent next year as the effects of the government's efforts to cool down investment unfold.

However, China will remain an important contributor to the global and regional economies.

China's growth in 2004 will account for 15 percent of the expected expansion in the world economy, even though it only has about 4 percent of the global gross domestic product (GDP), the report said.

"The country's strong performance will stimulate growth in the rest of the region."

China's GDP grew 9.1 percent in 2003 and 9.7 percent in the first quarter of this year on the back of whopping investment growth.

Fixed asset investment climbed by 43 percent in the first three months of 2004 after surging by 26.7 percent for all of last year.

However, the ADB said investment growth will likely fall to 16 percent during 2004-05 due to the government's fiscal policies.

These measures include a tightening of bank lending for overheating sectors; restrictions on investment in automobiles, iron and steel, aluminium and cement; and the gradual phasing out of the expansionary fiscal policy, which will reduce government-dependent investment.

The report said rapid urbanization and favourable income expectations will make consumption climb slightly to around 9 percent in 2004-05 from 8 percent last year.

Income expectations and consumer confidence have been improving as urban wages rise and rural incomes increase following a climb in grain prices, rural taxation reforms and fiscal support for agricultural development, the report said.

In addition, tourism and catering will grow significantly because of the lower base resulting from the impact of SARS in 2003.

The report predicted exports to rise at the lesser rate of 15 percent. Exports grew by 34.6 percent last year.

On the other hand, strong domestic demand - especially for oil, steel, grain, and raw materials - will be the major engine for the growth of imports, which will be in the order of 16 percent to 20 percent. The rate will exceed the increase in exports and result in a lower trade surplus, the report said.

Imports grew by 39.9 percent last year. In the first quarter, they climbed by 34.1 percent and imports increased even faster, by 42.3 percent, creating a trade deficit of US$8.4 billion.

Price growth is expected to accelerate, with the key barometer, the consumer price index, to grow by 2.7 percent to 3 percent, as compared to 1.2 percent in 2003. Price increases in grain, electricity, coal, construction materials and services will push the index higher.

(China Daily April 29, 2004)

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