ADB: China to grow 7% in 2009

Hong Kong - China's economic growth will fall to 7.0% this year, with its aggressive stimulus measures providing a buffer against the global slowdown, the Asian Development Bank (ADB) said on Tuesday.

The annual growth figure is down from 9.0% in 2008 and 13.0% in 2007, and below China's official target of 8.0%, which is seen as the minimum to prevent mass unemployment that could lead to social unrest.

The World Bank has forecast 6.5% growth for China this year, which would be the lowest level in almost two decades.

The ADB report said that China's crucial export sector, which makes up around a third of GDP, would suffer from a severe drop in demand.

"The dismal outlook for external demand suggests that merchandise exports are likely to fall by about 4% in 2009, before rebounding to 8% in 2010," the Asian Development Outlook report said.

But it welcomed China's huge stimulus measures, which started in November with a nearly $600bn plan aimed at stoking domestic demand.

The package included infrastructure spending and subsidies to key industries. The government has also released plans to boost health care spending, seen as key to breaking the country's inveterate saving habits.

The ADB said the measures would take to time to have an effect on the economy, which should rebound to 8.0% in 2010, the bank said.

"The focus on public investment in the stimulus package suggests that it will take some months to gain traction," the report said.

"As a result, the economy is not expected to pick up until the second half of 2009."

The ADB's flagship annual report said that growth in Asia's developing economies this year would fall to 3.4%, down from 6.3% last year and 9.5% in 2007.

- AFP