Lending, Fixed Asset Investments To Boost China's Economic Growth: ADB

Sponsored Links

Maintaining the Chinese government's fiscal stimulus measures and a moderate recovery in the global economy will boost the country's growth rate next year to more than initially expected, the Asian Development Bank said Tuesday.

In an update to its flagship publication Asian Development Outlook, the bank said the economy is likely to grow 8.9% next year, sharper than an 8% growth projected in March. This year China is expected to grow 8.2%, faster than the March forecast of a 7% growth, reflecting a surge in bank lending and fixed asset investments.

"Expansionary fiscal and monetary policies have softened the blow of the global slump on the economy," the ADB said.

The Manila-based lender expects major drivers of economic growth in 2010 to be infrastructure investment, construction, and an expansion of consumption. Net exports are likely to make only a small contribution, the report said, due to only modest recovery forecast for the global economy.

The ADB expects mild deflation to continue through most of this year, but forecasts inflation to rise to 3% next year, boosted by higher economic growth.

Meanwhile, the bank said the main risk to the outlook is a significantly weaker recovery in the global economy than currently expected. On the domestic front, an earlier than expected exit from the government stimulus measures, and concerns that the flood of bank lending could lead to another round of severe monetary policy tightening could pull down growth again, the ADB noted.

"A challenge is, therefore, for the Government to swing attention back to the restructuring efforts after the economy is weaned off the fiscal stimulus."

(Market News Provided by RTTNews)