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Hard acts may slow economy
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China's economy is likely to grow at a slower pace next year if the government's tighter monetary policies take effect, the Asian Development Bank said yesterday in a report.


"Economic growth in the People's Republic of China, the region's growth engine, will slow to 10.5 percent in 2008 from 11.4 percent in 2007 if government measures to cool the economy begin to take hold," the ADB said in its December issue of Asia Economic Monitor.


So far this year, the central bank has raised its benchmark rate five times and the reserve requirement ratio 10 times in its efforts to contain an increasingly overheating economy and surging stock markets.


"But given that the investment surge continues unabated and the stock indexes continue to rise, a further monetary tightening is widely expected before the end of the year," said the report.


China's growth in the first three quarters hit a record 11.5 percent and is projected to sustain double-digit levels for the remainder of this year and next, although the pace is likely to moderate to 10.5 percent in 2008.


Several measures have been introduced to curb rapid investment growth and asset-price inflation since mid-2006, but the full effect has yet to be seen.


"Surging food prices have driven headline inflation in recent months. The underlying factor, however, is ample liquidity in the economy as a result of persistently large capital inflows and strong growth in money supply in recent years," said the report.


Meanwhile, emerging East Asia will also see its growth ease to eight percent in 2008 from 8.5 percent this year as expansion in key industrialized nations moderates amid volatility in financial markets and rising oil prices, said the report.


The region's economic outlook is subject to greater downside risks now than just a few months ago - including a possible US recession, tightening of global credit, fluctuating exchange rates, and oil and commodity price rises.


(Shanghai Daily December 14, 2007)

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