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China to succeed in macroeconomic control
By Su Bei (China Daily)
Updated: 2004-09-23 08:53

China will succeed in cooling off an overheated economy and achieve a soft landing, the Asian Development Bank said Wednesday.

The country's economy is expected to grow by 8.8 per cent this year and slow to 8 per cent in 2005, the bank said in the Asian Development Outlook 2004 Update, which forecasts economic trends in Asian countries and regions.

The Chinese Government should continue with its macroeconomic tightening measures and, in an attempt to avoid a hard landing for the economy, encourage investment and growth in lagging sectors such as agriculture, small and medium-sized enterprises, the private sector, health and education, the bank said.

"The rapid pace of investment growth has slowed from the very high levels experienced in the first quarter, reflecting the gradual impact of the policy tightening measures," it said.

However, the large amount of construction in progress means that growth in investment will remain high at 25 per cent this year and 21 per cent in 2005.

In the longer term, such high levels of investment cannot be relied on to drive economic growth.

The bank said inflation is expected to moderate from a rate slightly over 5 per cent experienced in mid 2004, and consumption is expected to increase by 13 per cent in 2005, supported by higher urban and rural incomes.

Exports are forecast to rise by 22 per cent in 2004 and 16 per cent in 2005, based on expectations that the world economy will achieve higher growth in 2004 than in 2003 and moderate growth in 2005, and that China will remain the leading destination for global foreign direct investment.

Imports will grow faster than exports, the bank said, adding that China's rapidly growing markets are providing opportunities for other countries, particularly in Asia.

However, higher global oil prices have introduced new uncertainties for economic prospects for 2004 and 2005, the bank said.

If oil prices remain at around US$40 a barrel from the second quarter of 2004 through the fourth quarter of 2005, gross domestic product in 2005 will be 0.8 percentage points lower than forecast.

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