The nation must boost domestic demand to drive economic growth as a global recession looms, central bank governor Zhou Xiaochuan (right) said yesterday. In an interview posted on Phoenix TV's website, Mr Zhou said new stimulative policies were necessary to cope with the impact of external events. 'The overall demand in the market, in fact, is still quite strong. If you look at the extent of investment and consumption, you can see that growth is not bad,' Mr Zhou said. 'But feeling the impact from many factors, we need to further boost domestic demand.' The mainland's economic growth slowed to 10.4 per cent in the first half, compared with 11.9 per cent for the whole of last year, mainly because of weakening exports. For the first six months of the year, exports rose 21.9 per cent to US$666.6 billion, 5.7 percentage points smaller than a year earlier. Retail sales jumped 21.4 per cent to 5.1 trillion yuan (HK$5.8 trillion) during the period, while fixed asset investment increased 26.3 per cent to 6.84 trillion yuan. The National Bureau of Statistics is scheduled to release third-quarter economic figures next week. Many economists forecast economic growth of about 9 per cent for next year, the smallest since 2002 after five consecutive years of double-digit growth. To arrest the slowdown, the People's Bank of China eased limits on lending, cut interest rates twice in a month and allowed banks to set aside smaller reserves. Beijing-based investment bank China International Capital Corp expects the central bank to cut benchmark lending rates by 81 to 135 basis points and deposit rates by 27 to 81 points over the next 12 months. It would also cut reserve ratio by 350 to 550 points, CICC said. 'We think the monetary policy's effect will be limited. When the economy is on the downward track of a cycle, loan demand will shrink significantly,' CICC said in a research note. Du Ying, a deputy director of the National Development and Reform Commission, said yesterday that top leaders were highly mindful of a cooling economy. 'In our coastal regions, the downward trend has reflected in foreign trade and output, profit and growth rate of their industries since the second half of this year,' Mr Du said. 'It has aroused high attention at the State Council. It is preparing to issue a series of measures,' he said without giving details. Economists have forecast Beijing will use fiscal policies to boost the economy and restore investors' confidence in the stock market, including raising the exemption level on individual income, eliminating the dividend tax, higher spending in the public sector and more subsidies to the poor. To boost consumption of the 800 million rural residents, the party's central committee last week set the target of doubling their per capita disposable income by 2020.