The mainland's economic growth will drop from 7.4 per cent this year to 7 per cent next year but will rebound to 8 per cent in 2003, Salomon Smith Barney has forecast. Huang Yiping, Salomon's Greater China economist, said this forecast was based on an assumption that the United States economy would grow more than 5 per cent in the second half of next year. 'I know it's very bullish, but when the US economy rebounds the Chinese economy will benefit in the second half,' Mr Huang said. Mr Huang said mainland business confidence and consumer demand were edging down and he expected exports to turn negative in the next few months. Official figures show export growth had declined from August to a low of 0.1 per cent in October. A sharp rise to 8.4 per cent growth last month reflected orders delayed by the September 11 attacks on the United States. Mr Huang said foreign direct investment (FDI) in China was expected to rise to almost US$50 billion this year from about US$40 billion last year. However, China would not 'eat other Asian economies' dinner' now that it was a member of the World Trade Organisation. While Asian economies would have to find new market niches after China's WTO entry, much FDI in China was complementary to, rather than a substitute for, that in other regional economies. Mr Huang said the one-child policy and an ageing population meant China could quickly lose its competitive advantage in labour-intensive industries to India and Indonesia. Rising costs were forcing factories that produced cheap clothing and toys to move from coastal China to countries such as Bangladesh and Vietnam. However, the need to close inefficient state-owned enterprises, along with other reforms, would mean up to 40 million people - or 5.6 per cent of the total labour force - would probably lose their jobs in the first five years of WTO membership. However, membership could add from 0.5 to two percentage points to China's annual gross domestic product growth in the first five years because of better resource allocation through trade liberalisation, productivity improvements and increased foreign direct investment. 'We expect China to maintain growth of around 7.5 per cent for the next 10 years,' Mr Huang said.