ADB is bearish on China's economic prospects (Photo)

ADB is bearish on China's economic prospects (Photo) A textile factory in Huaibei. A new report lowers China's expected economic growth this year to 7.7%...

A textile factory in Huaibei. A new report lowered China's expected economic growth this year to 7.7%

Hong Kong - On Wednesday, the Asian Development Bank (Asian Development Bank) released a report predicting a decline in China's economic development. China's economic data released on the same day were weak. These highlighted that global economic turmoil and the slowdown in development momentum have made the Asian economy falter. The era of double-digit growth in Asian economies has become a thing of the past.

The Asian Development Bank updated in its latest economic report on the Asian region that the rising Asian region includes China, India, Indonesia and Thailand, but does not include Japan. The economic growth rate in 2012 may reach 6.1%, which is slightly higher than in 2009. At this time, the world economy is still reeling from the global economic crisis.

The updated report significantly lowered the forecast made by the Asian Development Bank for the same region in April this year, which predicted that the economic growth rate in this region would be 6.9% in 2012 and 7.3% in 2013. The lower forecasts underscore the deterioration in global economic conditions this year.

At a press conference in Hong Kong, Changyong Rhee, chief economist of the Asian Development Bank, said, "Economic growth is declining much faster than expected."

What's worse is that the economic decline is particularly obvious in the region's heavyweight economies, China and India. The economic growth rates of these two countries are expected to only reach 7.7% and 5.6% respectively this year.

Again, these two figures are lower than the Asian Development Bank's previous forecasts and both countries' growth rates last year; India was particularly hard hit because of domestic problems, such as the slow pace of economic transformation.

Compared with India, China is more dependent on exports. China's economy has slowed down rapidly over the past year. Before the economic crisis, China's economy experienced double-digit surges for many years. Despite this, policymakers still recognized an economic growth rate of about 7.5%.

On Wednesday, figures from China's service industry showed that in September this year, the service industry experienced the weakest expansion in the past many months: the purchasing managers index released by the National Bureau of Statistics fell from 56.3% in August to 53.7% in September. If this number is higher than 50%, it shows that the industry is expanding.

According to the Asian Development Bank, the service industry contributes 40% to China's overall economic growth and one-third of its employment opportunities. Analysts commented that weak economic data in September showed that not only exports, but also China's domestic demand was sluggish.

In the third quarter of this year, Klaus Bader, an economist at Société Générale in Hong Kong Baader wrote in a report to clients, "We see that the Asian economy is bottoming out, but the level of uncertainty has increased."

The Asian Development Bank emphasized that although it expects Asia's economic growth to slow down, the growth rate is still "enviable."

Chief Economist Lee Chang-yong said, "There is no need to panic," adding that China is taking a wait-and-see attitude to implement measures to stimulate growth, which "seems to be the right way to go at this moment."

Analysts have long argued that China and other emerging economies must focus on the quality of economic growth rather than the sheer rate of economic expansion. They also advocated reducing the dependence of these economies on exports and manufacturing to promote growth, and instead focusing on cultivating domestic demand, improving productivity and encouraging the development of the service industry.

Lee Changyong said the region's service industry is larger than generally believed, but shabby infrastructure and a lack of qualified talent have constrained economic development, while poorly designed rules and inconsistent enforcement often stifle the business environment.

Lee Changyong said, "There are a large number of rules that restrict competition. They restrict the development of the service industry and affect all service industries from corner stores to mobile phones. These obstacles must be removed."

Translation: Zhang Wei

(The New York Times Chinese website)