Beijing, March 27 (Xinhua) A report by the Asian Development Bank (ADB) Tuesday predicted that China's gross domestic product (GDP) will rise by 10 percent this year.
According to the Asian Development Outlook 2007, weakened external demand and tightened domestic curbs are expected to pull down the country's growth gradually in 2007 and 2008.
With rising profit growth and ample liquidity in the banking sector, investment is expected to continue its fast growth and remain as the main driving force of the economy, the report said.
Zhuang Jian, a senior economist with the ADB resident mission in China, predicted the central bank would stick to tight monetary policies in 2007 with measures such as adjusting the interest rate and deposit reserve ratio, and open market operation.
Meanwhile, the government would guide investment with stricter controls on energy consumption, pollution and land use, he said.
However, the economy still faced many challenges such as a heavy reliance on exports, a weak service sector in terms of GDP and an increasing income gap, Zhuang warned.
The urban-rural income gap rose to 3.3:1 in 2006, according to the ADB.
The country's annual GDP growth will slow to an average of nine percent while the consumer price index (CPI) will increase slightly to around three percent from 2007 to 2011, report said.
Investment growth pushed by industrialisation, urban infrastructure and housing expansion driven by urbanisation, the government's efforts to create more jobs and to reduce the income gap, improved domestic productivity and inflows of foreign direct investment, technology and management all supported China's fast growth in this period, said Zhuang.
The ADB forecast China's GDP would grow by 9.8 percent in 2008 while the CPI would rise by 1.8 percent in 2007 and 2.2 percent in 2008.
Hikes in labour costs and rising prices for water, electricity and fuel are expected to be the major driving forces for the CPI rise.