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September 23, 2009

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ADB sees 8.2% rise for China's economy

THE Asian Development Bank raised its forecast for China's economic growth this year to 8.2 percent, twice the average pace it estimates for growth in Asia outside Japan.

The bank revised its China estimate from 7 percent in March, citing the effects of the government's stimulus package. The report, released yesterday, said growth in 18 developing economies in Asia would rise 3.9 percent, with China's economy topping the list. The bank also upgraded its forecast for China's growth next year to 8.9 percent from 8 percent, based on expectations that the government will continue stimulus spending and the world economy will show a moderate recovery.

"The stimulus package and aggressive monetary easing in 2009 have softened the blow of the global slump on China's economy," said Jong-Wha Lee, ADB's chief economist. "The government's 8 percent growth target for this year now looks within reach."

Steady stimulus

The Chinese government set that target at the start of this year after it announced a 4 trillion yuan (US$586 billion) stimulus package and adopted loose fiscal and monetary policies.

Yao Jingyuan, chief economist with the National Bureau of Statistics, affirmed last week that China will meet the target, though he said the recovery hasn't achieved a "solid" footing yet and many uncertainties remain.

The ADB report said the bank assumes China's fiscal stimulus will be maintained through 2009 and 2010.

"It is also assumed that monetary policy, after some fine-tuning, will be kept at highly stimulatory levels until inflation returns," it said.

Public spending is expected to remain at high levels because of the stimulus package. Investment from the private sector may remain subdued, particularly in manufacturing, until external demand improves significantly.

Bright spots

"Official proposals to widen access to credit for small and medium-sized enterprises, if realized, should stimulate private investment," the report said.

Solid growth is expected in consumer consumption, underpinned by rising incomes and government subsidies, and to some extent by recoveries in residential property and stocks.

"Recoveries in sales and prices of residential property are encouraging developers to invest in new projects, and the outlook for commercial property is also improving," the report said.

China's gross domestic product expanded 7.1 percent in the first half, as investment and domestic consumption countered slumping exports.

The report said the main risk to its forecast is the possibility of a significantly weaker recovery in the international economy.


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