China's economy may expand by 10 percent this year because of weakening external demand and domestic tightening policies, the Asian Development Bank (ADB) said yesterday.
That would be 1.4 percentage points lower than last year, and it could further slow to 9.8 percent next year, the ADB said in its latest report on Asian economic outlook.
The World Bank has forecast a 9.4 percent growth for this year and 9.2 percent for the next.
The ADB said China's export growth may slow to 19 percent this year and further to 16 percent next year, down from 26 percent last year, in the face of weakening global demand and cuts in export tax rebates. Import growth may stand at 20 percent this year due to yuan appreciation, cut in import tariffs and other import-friendly policies.
It warned that rising inflation would pose a serious challenge to the country as its CPI may hit 5.5 percent this year, higher than the 4.8 percent target set by the government. Next year it may continue to hover around 5 percent, the report said.
The bank previously predicted that China's GDP may grow by 10.5 percent this year, but the worsening US subprime crisis and the likely global economic slowdown have made the bank notch down its forecast.
The industrial sector has already begun to show signs of slowing down, with profit growth of China's major industrial enterprises dropping to 16.5 percent year-on-year in the first two months, compared with 43.8 percent in the same period of last year.
"As contribution from the external side falls, GDP growth will be pulled down," the report said.
In the worst case scenario, China's economic growth may be hit by a hard landing and slump to 7 percent, although that possibility is "very slim", said Zhuang Jian, senior economist of the ADB Beijing office.
Such a hard landing can be caused by three factors: a more than expected deterioration in the global economic and financial condition; a major downturn in China's property or stock markets, or both; and the acceleration of inflation from the current high level. A combination of these three would drag down China's economic growth to that level, the report said.
"If that happens, it will directly affect China's employment," Zhuang said.
The report said China's food price rises may not stabilize until the third quarter of this year, when supply of pork and grain are likely to pick up.
Source:China Daily
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