China will regain speed next year

Paris: Chinese growth is likely to slow to 8.2 per cent this year, its weakest in more than a decade, before government support helps it rebound to 9.3 per cent by next year, the Organisation for Economic Co-operation and Development (OECD) said yesterday.

The OECD cut its growth forecast for the world's second-largest economy from 8.5 per cent made last November. That is still higher than a government target of 7.5 per cent for this year.

"As the inventory cycle turns, and fiscal and monetary policy become more expansionary, growth should pick up in the course of 2012 and stabilise at over 9 per cent in 2013," the Paris-based body said in its biannual outlook.

Increased policy support and an expected recovery in the global economy could lead to a rebound in activity in China in the second half of this year, it said.

The OECD said the government, which has signalled a willingness to take action to halt the slowdown, was likely to step up investment in key infrastructure projects if growth weakened in the current quarter.

Data for April, including factory output and fixed-asset investment, suggests growth has weakened from the first quarter, when it hit a three-year low of 8.1 per cent in annual terms.

The OECD expects the central bank to ease policy further and boost bank credit for first-time home buyers and sound property developers, which could help stabilise the property market.

The People's Bank of China has cut the amount of cash banks must hold as reserves three times since November to crank up lending. Analysts polled by Reuters expect further cuts in reserve requirements and more fiscal measures to support the economy.

Full-year annual inflation is expected to fall to 3.3 per cent this year from 5.5 per cent last year, the OECD said. Inflation could fall further 2.9 per cent next year.

The OECD projected China's current-account surplus as a percentage of gross domestic product would fall to 2.3 per cent this year and 1.7 per cent next year.