(Xinhua)
Updated: 2008-04-02 23:17

HONG KONG - The Chinese economy is likely to grow 10 percent in 2008, while inflation is expectedly to average 5.5 percent as rising food prices stoke upward pressures, the Asian Development Bank (ADB) said in a report Wednesday.

"The contribution of consumption to gross domestic product (GDP) is expected to rise in 2008 and investment will continue to be a driver of growth," Ifzal Ali, the bank's chief economist, told a press conference in Hong Kong, where the Manila-based bank released its annual forecasts in the Asian Development Outlook (ADO) 2008 report.

Ifzal said the projected growth was the combined result of "aggressive monetary tightening measures, weak global prospects, and tighter lending policies."

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China's economic growth of 11.4 percent in 2007 was the highest in 13 years.

The bank projected a growth of 7.6 percent and an inflation of 5.1 percent for the economies of developing Asia as a whole in 2008, saying that the external environment was unfavorable as "a global slowdown is now under way."

The ADO baseline forecasts have been revised down significantly over the last few months and, as new data were released, analysts continued to cut their growth forecasts, it said.

"One of the fundamental changes is that, instead of a slowdown only in the United States, we are seeing coincidental declines across the United States, the eurozone and Japan," Ifzal said.

China, more open to international trade than India, will be more affected, he added.

He said signs of overheating have been emerging in developing Asia, citing the examples of infrastructural bottlenecks and skilled labor shortage.

China's export growth is expected to slow from 26 percent in 2007 to 19 percent in 2008 and further to 18 percent in 2009, largely due to weaker global demand and cuts in export rebates.

The growth in China's domestic consumption, coupled with that of India, were "healthy signs" that could provide a counter balance for the US slowdown, although trade within Asia were still not enough to substitute outbound trade, Ifzal said.

The bank projected an economic growth of 7.8 percent and inflation rate of 5 percent for 2009.

The current account surplus, representing 11 percent of the GDP in 2007, is forecast to decline to 9.9 percent in 2008 and 8.6 percent in 2009, said the report.

"Rising food prices will stoke inflationary pressures. As the trade surplus and surging capital inflows contribute to excess liquidity, the authorities are expected to permit faster appreciation of the yuan against the US dollar," it said.

The report also identified three challenges: boosting domestic consumption, addressing the energy and environment concerns and bridging income inequality.