ADB says China growth decelerating but remains strong

The Asian Development Bank said on Tuesday that China's economic growth would moderate to 10 percent this year from 11.9 percent in 2007 and ease further to 9.5 percent in 2009.

The forecast in the bank's half-year report -- the Asian Development Outlook 2008 Update -- was the first from the ADB for China's economic growth since the catastrophic earthquake in May.

The report said despite the forecast deceleration, China remained among the world's fastest-growing economies.

The forecast for 2008 was unchanged from April, but the growth figure for 2009 was lowered from 9.8 percent.

Ifzal Ali, chief economist of the Manila-based development bank, said the growth rate forecast was maintained on the assumption that private consumption would remain robust as incomes generally outpaced inflation

"Growth of 9.5 percent in 2009, as we have forecast, would bring the economy back to its long-run sustainable growth range of9 to 10 percent, easing the strains on energy, inflation and the environment," said Ali.

The report noted that China's private consumption was strong, despite accelerating price pressures.

Zhuang Jian, a senior economist with the ADB mission in China, said that the country's retail sales grew 22.2 percent in nominal terms during the second quarter. "While higher prices accounted for part of this increase, real incomes continued to grow, underpinning rising consumption."

Zhuang said higher government spending on social security, education and health care might also be encouraging households to spend more, as their need to save for these services diminished.

The bank also warned of the risks of a sharper than expected slowdown in exports.

The bank revised its prediction for China's annual inflation rate to 7 percent for 2008, up from the forecast of 5.5 percent in April, and put the 2009 forecast at 5.5 percent, up from 5 percent.

The bank said it made the revisions to reflect higher-than-expected inflation in the first half and expectations of higher energy prices. It also said food price rises could decline to single-digit levels late in the year, but the government was likely to further raise administered energy prices as food prices eased.

The bank also said the recent drop in oil prices would be short-term and Asia's explosive growth would exert further pressure on global oil supplies. It forecast oil prices would remain above 100 U.S. dollars a barrel until at least 2020.

Source:Xinhua