China economic growth to slow with investments, says ADB

The mainland's economic expansion may cool to 7.5 per cent this year as investment growth slows, but the yuan may still rise in the medium to long term, says the Asian Development Bank.

"[Investment growth] will likely decelerate as the government tries to rein in high credit growth, reduce industrial overcapacity and bring local government debt under control," the Manila-based multilateral bank said yesterday in its annual economic publication, .

Growth in the world's second-largest economy was likely to ease to 7.5 per cent this year, in line with the official target, and 7.4 per cent next year, slowing from 7.7 per cent last year, the bank said.

Jurgen Conrad, the head of the economics unit at ADB, however, said he believed the yuan's recent downward trend would not last long.

The yuan fell 2.7 per cent in the first quarter, reversing a 2.9 per cent gain last year.

The People's Bank of China doubled the daily trading band for the yuan against the US dollar last month to make the currency more flexible. It also warned investors against betting on one-way appreciation.

Conrad said fundamentals on the mainland still supported a stronger yuan.