'Mainland GDP growth to slow'
By Paresh Chugh (China Daily/HK Edition)
Updated: 2005-04-07 14:14

The mainland's growth will slow down this year because of a more balanced development strategy and continued macro-economic controls and changes in the global business environment.

The Asian Development Bank (ADB) said in its report released yesterday that the GDP growth rate will fall from 9.5 per cent last year to 8.5 per cent this year, rising slightly to 8.7 per cent in 2006 and 8.9 in 2007.

Though growth across the sectors will slow down, ADB said manufacturing and construction, two of the most flourishing sectors, will be especially "hampered by bottlenecks in energy and transportation, land constraints and reduced levels of investment".

The rapidly expanding economy put stress on the supply of electricity, coal and oil last year.

Most mainland areas suffered brownouts, while raw materials and finished products couldn't be shipped out.

Some analysts said adequate power supply could be ensured only after 2006.

The report forecasts the export growth rate to fall to 12-20 per cent in 2005-2007, from over 30 per cent in 2004, because major trade partners are introducing protectionist and anti-dumping policies against goods from the mainland.

Trade surplus will be reduced as more sectors are opening up to foreign competition as pledged by China while entering the Word Trade Organization.

The mainland's financial sector is a potential risk area, says the report, warning that more competition from international players in domestic banking by 2006 could see deposits and funds moving out of State-owned commercial banks.

This could further strain their existing problems caused by rudimentary service, non-performing loans, antiquated management and capital shortages.

Hong Kong's GDP growth moved in tandem with the mainland, and it too will fall, to 5.7 per cent this year from 8.1 per cent in 2004. Hong Kong and the mainland both outpaced Asia's average growth of 7.3 per cent in 2004.

Looking into its crystal ball, the ADB has predicted private consumption and investment, as opposed to exports, to be the engine behind the SAR's future growth. Private consumption is expected to grow by 6-7 per cent each year till 2007, while imports are expected to outpace exports.

The report says the Closer Economic Partnership Agreement with China would continue to help the SAR's economy, boosting inflows from foreign direct investment and promoting its products and services.

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