Any outbreak of war in Iraq would hit China's economic growth next year, slowing it to 7.4 per cent from a projected 8 per cent, according to Salomon Smith Barney senior economist Huang Yiping.
Mr Huang predicted economic growth next year would match his estimates of 8 per cent this year in the absence of war.
Last year, China's economy expanded 7.3 per cent.
In the event of a war, Mr Huang said slower growth would force the government to continue its expansionary policy and further increase fiscal deficits.
'Higher oil prices and weak external demand would also lead to deterioration in the trade and current account balances.'
War was most likely to break out in the fourth quarter, but the situation should stabilise within six months, Mr Huang said in a recent research report.
