Asian Development Bank: Chinese economy to slow to 10 percent in 2008

HONG KONG, April 2 – China’s economy is expected to slow to 10 percent in 2008 according to a report released by the Asian Development Bank on Wednesday.

ADB’s annual Asian Development Outlook 2008 forecasts developing Asian economies to expand at 7.6 percent in 2008 and 7.8 percent in 2009.

“Asia will not be immune to the global slowdown,” said ADB Chief Economist Ifzal Ali. “Neither will it be hostage to it. It remains tied to global activity through traditional trade channels, and increasingly, through its closer integration in international markets.”

The slowdown in the economies of the United States and the EU are expected to have a pronounced impact on China as the country is more dependent on trade than the other developing economies in the region. However, while Asia will not be immune to the global slowdown, it will also not be hostage to it Ali said.

China’s economy showed signs of overheating in 2007, inflation rose to an 11-year high according to the ADB economist. The ADB expects inflation in Asia to “spike,” possibly hitting a decade high with and average 5.1 percent rate throughout the region in 2008, followed by 4.6 percent in 2009.

In China, the rising cost of basic necessities remains a challenge. Food and energy have seen double digit increases over the last year, putting strain of China’s runaway growth.

“Looking beyond the immediate bumps in the road, Asia’s long-term growth prospects will depend on how successfully countries tackle a range of structural constraints facing them” Ali said.

These include maintaining macroeconomic stability, integrating in to the global economy, getting prices to send the right signals, and creating a conductive business and investment climate the report said.