China GDP growth seen slowing to 8.9 pct in 2007 from 10.4 pct in 2006-Deutsche

Deutsche Bank said it expects China's gross domestic product (GDP) growth to decelerate slightly to 8.9 pct in 2007 from 10.4 pct this year, as the government's austerity measures take effect and as the US economy slows. In a research note, Deutsche added that it expects China's GDP to grow by an average of 8-9 pct from 2006-2010 and 7-8 pct from 2011-2015. Tightening policies introduced earlier this year are already having an effect, visibly slowing fixed-asset investment growth, which dropped to 21.5 pct in August from over 30 pct in the first half of the year. Deutsche said it does not expect further major administrative tightening measures in the foreseeable future, but added that the central bank is likely to raise the reserve requirement ratio again before the end of the year. This would impact M2 growth, which the bank said may decelerate to 15-16 pct in 2007 from 18 pct now. Year-on-year, loans growth is likely to slow to around 13 pct in 2007 from 15-16 pct currently, with an average growth rate of 12-13 pct per year over the next five years, Deutsche said. It added that it expects the yuan to appreciate against the US dollar by about 3-4 pct over the next three years, which would be regarded in China as a politically acceptable pace of increase. The bank said that key risks to China's economy include a sharp US slowdown, over-reliance on imported energy and mineral resources, environmental degradation and income disparity.