Economist sees peak of overheating and slower money flow The mainland's economic growth was 'extremely high' in the first five months of the year but should slow in the third quarter because of inflationary pressure in the US and Japan, says an investment bank economist. 'I think for China, the overheating is already peaking,' said Andy Xie, chief economist for Asia-Pacific at Morgan Stanley. 'Money won't be going into China anymore. The economy is going to be quite cool in the next year.' Rising interest rates in the United States and Japan would cause yuan speculators to move their cash from the mainland to other markets to earn higher returns, Mr Xie said. A slowing US economy would also reduce the trade deficit with China and money flowing into the mainland. Both of these factors would contribute to lower growth in the mainland economy, he added. Mr Xie's comments came after People's Bank of China governor Zhou Xiaochuan said on Saturday that gross domestic product would grow at least 10 per cent in the second quarter and for all of 2006, according to a report by Reuters yesterday. Speaking on the sidelines of the annual meeting of central bankers at the Bank for International Settlements in Basel, Switzerland, Mr Zhou said: 'I think probably for the entire year it's also something around 10 per cent' adding that second-quarter growth would also be 'probably quite high', at above 10 per cent. Mr Zhou would not be drawn on whether Beijing would allow the yuan to strengthen further. 'The currency now is set by the market demand-and-supply relationship. The market changes from time to time,' he said. Despite measures to curb growth, recent data shows the economy is steaming ahead, with investment in factories and other fixed assets in the first five months of this year jumping 30.3 per cent from last year. In the first quarter of the year, the economy expanded by 10.3 per cent. Last year GDP growth rate was 9.9 per cent. Beijing surprised financial markets in April by raising interest rates for the first time in 18 months. It increased its benchmark one-year lending rate to 5.85 per cent, from 5.58 per cent. The central bank also raised the amount of cash that banks have to hold in reserve by 0.5 percentage points earlier this month to rein in lending and excessive investment. Speaking to Hong Kong reporters in Uganda on Friday, Premier Wen Jiabao said one of the reasons why China must maintain fast growth was to avoid unemployment. 'We would face unemployment if our economy slows down,' Mr Wen said. . 'But if it is surging too fast without paying attention to economic quality, efficiency and environmental protection, the economy won't be sustainable.' Mr Wen returned to Beijing yesterday after a seven-nation tour.