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.