Report: China's GDP to slow to 9.4 pct in 2008

(Xinhua)
Updated: 2008-11-02 21:44

China's gross domestic product (GDP) growth is expected to slow to 9.4 percent in 2008 from last year's 11.4 percent as the shrinking exports will cool the world's fourth largest economy, according to a Chinese credit rating agency report on Sunday.

The fundamentals of the economy are sound, but falling export orders would take a toll on the national economy in the short term, and domestic consumption needed time to play a bigger role, said the report released by the China Chengxin International Credit Rating Co. (CCXI), a joint venture of China's first rating agency China Chengxin Credit Management Co. Ltd. and US-based Moody's Corporation.

The changing external economic environment and the burst of domestic asset bubbles would exacerbate the slowing economy, said the report.

The proactive fiscal policy was key to preventing the economy from falling and there was room for further cuts in bank reserve requirement ratios and interest rates.

It predicted the economy would gain 8.6 percent in 2009, but it gave no explanation of its forecast.

China's economy grew at 9 percent in the third quarter, the slowest in five years, as the global financial crisis sapped demand for Chinese goods, and domestic industrial production waned in response to weak demand and rising raw material costs.

The government has lowered interest rates three times in the last two months, increased export rebates and cut property transaction taxes to boost domestic consumption.

The report said the world financial crisis would have limited direct impact on the domestic banking system, but it warned Chinese exporters of default risks of foreign buyers.

Insurers and securities companies would be affected as the domestic capital market was growing more connected to the international market.

In September, the Manila-based Asian Development Bank, projected China's GDP growth to fall to 10 percent this year and further ease to 9.5 percent in 2009.

The slow-down was a result of the combined effects of a reduced trade surplus, slower growth in investment, and the global economic downturn, the Asian Development Outlook 2008 Update has said.