China's growth rate may dip to 9.9%

By Xin Zhiming (China Daily)
Updated: 2008-07-23 08:00

Economic growth in China is expected to hit 9.9 percent this year and 9.7 percent in 2009 while in emerging East Asia it will moderate to 7.6 percent in 2008 and 2009 from 9 percent in 2007 due to a global economic slowdown, sharp rise in food and energy prices and volatile financial markets, said a report by the Asian Development Bank (ADB).

The region's growth outlook is vulnerable to a higher-than-expected spike in inflation, protracted slowdown in the US and any further tremors in global financial markets, said the July issue of the Asia Economic Monitor (AEM).

Another ADB report in April forecasted that China's economy would expand by 10 percent this year and 9.8 percent the next.

The worse-than-expected US economy has exacerbated global worries that the economic slowdown across the globe may continue following the revelations that government-sponsored Fannie Mae and Freddie Mac are in serious trouble. This will have an impact on the Chinese economy.

"The US economy is gloomier than people expected and it will take more time for it to recover," said Zhuang Jian, an economist from ADB in Beijing.

But he said even if China's economic growth slowed to 9.9 percent this year, it would be a "fairly good" rate.

The AEM report said the region's policymakers were caught in the pincer grip of slowing growth and rising inflation.

It warns that inflation will continue to pose a serious challenge to policymakers across the region, including China. Inflation is expected to rise to 6.3 percent for the region, more than double the rate of the past 10-year average. The core inflation, a measure of price increases that excludes food and energy costs, is rising in the region, a sign that a more broad-based second-round price effect may be under way, it said.

China has seen its consumer inflation drop to 7.1 percent in June from the peak of 8.7 percent in February. But analysts said the possible energy price liberalization may make inflation rebound in the coming months.

"Rising inflation is a serious threat to the region's sustained, strong growth as high import costs of food and fuel threaten to trigger a price and wage spiral, unleashing more inflation," said Lee Jong-wha, head of ADB's office of regional economic integration.

Growth in ASEAN member economies is expected to ease by 1 percentage point to 5.5 percent in 2008, according to the semi-annual AEM.