The Organisation for Economic
Cooperation and Development (OECD) has predicted that the Chinese economy would grow by eight percent in 2005, saying at the same time that a restrictive economic policy would lead to a slowdown, reports Xinhuanet.
According to the OECD, despite restrictive government credit policy to companies, the production was on a rise.
"Following the initial disruption from these measures, companies appear to have found ways to moderate the impact of the administrative actions and output growth has recovered sharply," said the OECD in a twice-yearly outlook report published on Tuesday.
The organisation said the tiny rise of interest rate at the end of October announced by the Chinese central bank would have little impact when the effective interest rate following the credit ratings was higher than the official one.
It forecast a continuous inflation of four percent due to hike in food and raw materials prices in 2005 and 2006 compared to 4.2 percent this year.
The OECD predicted that the value of oil imports is expected to increase by almost two percent of GDP between 2003 and 2005, adding a restrictive economic policy in addition to oil prices hike would lead to a slowdown of production growth.
The OECD also noted that an abrupt slowdown in bank lending had "disrupted the provision of working capital and could lead to a greater than expected rundown in inventories and hence output, which might set off downward revision of industrial investment plans."
It added that China remained competitive due to its stable exchange rate, flat unit labour costs and the removal of textile quotas next year.
--Indo-Asian News Service