Chinese slowdown threatens Asian growth

Chinese slowdown threatens Asian growth

Agence France-Presse, Singapore

Economic growth in the Asia-Pacific will continue to outpace the rest of the world in the next five years but a Chinese slowdown looms as a genuine threat to the region, the Economist Intelligence Unit said.

In a report received here on Monday, the London-based EIU said the Asia-Pacific's economies, outside Japan, would grow at an average annual rate of 5.8 percent between 2004 and 2008, faster than any other region in the world.

The EIU said the region's growth this year was likely to be 6.5 percent, but the environment will be less friendly in 2005 and beyond with Beijing's efforts to rein in its red-hot economy the main reason.

"Concerns are mounting about the pace of investment and credit growth in China," it said.

"If, as seems likely, a bubble is building, this could have significant repercussions, not just for China itself but for the rest of the region."

The EIU said China's economy should slow to below 8.0 percent between 2004 and 2008, down from the plus-9.0 percent rates experienced recently, and a potential investment bubble is not expected to balloon out of control.

"Nevertheless... even the gentle deflating of a bubble could be painful for business," it said.

China's booming economy, which has seen the country emerge as the global workshop producing virtually everything from hi-tech computer chips to silk scarves, has been a boon for the region in the past few years.

Previously Asia relied mainly on the United States to buy its exports.

Even if China's economy maintains solid growth, the EIU said Asian countries must undergo "potentially disruptive economic restructuring" to latch on to its giant neighbor's strength.

Another key risk for the region in the next five years is countries continuing to be buffeted by changes in international liquidity flows.

The EIU also pointed to the "deteriorating physical security" levels across much of the region and the slowing of "business- friendly" reforms following the slew of elections that have just been held, or will about to be staged.

Across the region, South Asia's economies are expected to grow average 6.9 percent annually through 2004-2008, while the 10- nation Association of Southeast Asian Nations is projected to expand by 4.9 percent a year.

Hong Kong's economy was projected to expand by 6.5 percent this year before moderating to 4.6 percent in 2005, the EIU said without giving figures for the full five-year forecast period.

Similarly, Taiwan's economy is expected to grow 6.0 percent in 2004 and decelerate to 4.9 percent next year.

Japan, which was not included in the regional forecast, is expected to grow 4.4 percent in 2004, it's fastest pace for 14 years, before dropping to 2.1 percent in 2005 and 1.2 percent in 2008.

Vietnam was tipped to have the fastest growth rate within ASEAN in the next five years with 7.0 percent annual expansion, the EIU said.

"This strong performance, the fastest in ASEAN, will partly reflect the buoyancy of the non-state sector and the expanding tourism sector, which will fuel growth in services," the EIU said.

Elsewhere in ASEAN, Singapore and Malaysia were expected to grow about 5.9 percent this year while in Thailand, the economy would grow 7.7 percent in 2004 and slow to 6.2 percent in 2005.

Indonesia's economy was likely to grow 4.9 percent this year, lifted by election-related spending and rising exports, with a similar rate expected in 2005.

In the Philippines, economic growth was projected at 4.5 percent this year and 4.2 percent in 2005.