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BIZCHINA / Macro Economy

ADB: China economy to slow moderately

By Zhu Qiwen (China Daily)
Updated: 2007-03-28 08:32

China's economic growth will moderate slightly in the next two years
because of tight macroeconomic controls and government efforts to alter
the growth pattern, the Asian Development Bank (ADB) said yesterday in
its flagship annual publication.

The Asian Development Outlook 2007 predicts that the economy will grow 10
percent this year and 9.8 percent the next.

"The performance of the Chinese economy was exceptional in 2006 and will
remain strong in 2007 and 2008," said Zhuang Jian, an economist at the
multilateral development bank.

Rapid growth in exports and strong fixed asset investment helped deliver
yet another year of double-digit growth of 10.7 percent last year.

The country's efforts to rein in galloping fixed asset growth are
expected to gain more traction this year, the report forecasts.

The authorities have taken many steps to cool down the economy. For
instance, the People's Bank of China, the central bank, has raised the
base lending rate thrice from 5.58 percent to 6.39 percent and the
reserve requirement five times from 7.5 percent to 10 percent in the past
year to curb credit growth and investment expansion.

The National Development and Reform Commission and the State
Environmental Protection Administration have raised energy efficiency and
environmental requirements for investment.

However, recent monthly data are yet to show clear trends for industrial
production and fixed asset investment, the ADB report points out.

Figures from the National Bureau of Statistics show that factory output
in January and February combined grew 18.5 percent from a year earlier,
compared to 14.7 percent in December and 16.2 percent for the first two
months of 2006.

Meanwhile, growth in urban fixed-asset investment rebounded from about 20
percent in the fourth quarter last year to 23.6 percent for the first two
months of this year.

"Progress was limited on most fronts," said Zhuang, "but difficulties in
shifting the growth pattern will not be addressed overnight."

The ADB suggests that China strengthen the social security system, spend
more on education, healthcare and rural development, and take more
effective measures on energy efficiency and environmental protection.

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