September 14, The Asian Development Bank (ADB) has cut its China growth estimate for 2011 to 9.3% from 9.6%, citing a failure to sufficiently rebalance the economy toward consumption and major risks from rising deep local government debt and uncertain external demand.

In revisions to its Asian Development Outlook, the Manila-based lender also trimmed its 2012 growth forecast from 9.2% to 9.1%. China faces risks from too much investment, too little consumption, widening income disparity and an aging population.

ADB is the latest major global financial institution to cut its China economic growth forecast recently, and last week a senior currency regulation official warned that a slowdown in major economies could drag China’s economic growth to below 9% next year.

On Aug. 25, Swiss bank UBS AG cut its China economy growth forecast for 2011 and 2012 on expectations of weaker growth prospects in developed economies such as North America and Europe.

ADB also raised its inflation forecast for China to 5.3% from 4.8% because of higher-than-expected food prices in the first half of this year. But inflation will drop to 4.2% in 2012 as global food and oil prices decline and a stronger Chinese currency reduces the effects of imported inflation.

Inflation hit a 37-month high of 6.5% in July, although it moderated to 6.2% in August. The official inflation target for this year is 4%.

Raising consumption is an important task for China, the bank said. The country’s new policies this year, which include reductions in personal income tax, increases in minimum-wages and improvements in pension coverage, should help to stimulate private consumption.

Source:Business China