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China predicts growth will slow to 8.5%

"A slowdown in the first quarter is the direct result of the government's decision to reduce fixed-asset investment to keep the economy from overheating."

Chris Leung, a senior economist at DBS Bank

China predicts economic growth will slow this quarter as fixed-asset investment and exports ease.

The economy, the world's sixth-largest, will probably grow 8.5 percent from a year earlier, slowing from a 9.9 percent pace in the fourth quarter, the Beijing-based commerce ministry said on its Web site, citing a study by the National Development Reform Commission.

Fixed-asset investment, which includes spending on factories, roads and railways, will probably rise 22 percent after climbing 27 percent last year, it said.

The central bank last year raised banks' reserve requirements and tightened rules governing lending to property developers and some other industries amid concern too much capacity was being added.

"A slowdown in the first quarter is the direct result of the government's decision to reduce fixed-asset investment to keep the economy from overheating," said Chris Leung, a Hong Kong-based senior economist at DBS Bank.

Fixed-asset investment accounts for about a third of China's US$1.4 trillion economy.

Li Deshui, a director of China's statistics bureau, said last month China's economic growth will probably slow this year to more than 7 percent from 9.1 percent last year. Standard Chartered Bank forecast earlier this week that China's growth will ease to 7.7 percent this year.

Exports, which jumped 51 percent in December, will probably grow a fifth this quarter, the commerce ministry report said.

Overseas sales grew in December at their fastest pace in more than eight years as exporters accelerated shipments to take full advantage of tax rebates that were cut at the start of this year.

Even as investment and exports moderate, consumer spending may remain strong. Retail sales grew 11 percent in December -- their fastest pace in two-and-a half years and the ministry forecasts consumer spending will maintain that pace of growth this quarter.
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