MercoPress. South Atlantic News Agency

China forecasts slower growth this year: ?8.7%

China's steam rolling economic growth will slow gradually towards the fourth quarter, according to a Chinese central bank report published in “China Securities Journal”.

The People's Bank of China predicts that the nation's economy will expand by 9.2% in the first quarter of 2006, falling to 8.7% in the fourth. The economic boom is being led by a surge in exports. In the previous two years China's economy expanded 9.9 and 10.1%.

Beijing is also putting more efforts into increasing domestic consumer demand to satisfy a growing middle class which has developed in the main eastern cities. However the main challenge for the Chinese government is to expand this new wealth across more of the vast country and the several hundreds of millions rural population that survive on a dollar per day.

The central bank said consumers would pay around 2% more for goods and services in 2006 than they did last year, when prices rose 1.8%.

"In general, our country's GDP growth will gradually trend lower in future but will still maintain a high level," the central bank said. "We also see no major fluctuations for consumer prices in future".

The Chinese Central Bank report assumes world growth in the range of 4.3% with interest rates remaining stable.

But in spite of the encouraging prospects China also faces growing pressure from Washington that is pressing for a revaluation of the Chinese currency given its impact in US-China trade.

Several U.S. Congress members and manufacturers believe the Yuan is undervalued by at least 15% against the US dollar and are threatening to slap tariffs of up to 27% on some Chinese goods.

The yuan was revalued last July 2.1% after a whole decade fixed at 8.28 yuan to the US dollar. The Central Bank allows the yuan to fluctuate 0.3% up or down.

The US trade deficit with China in 2005 reached an all time record of 202 billion US dollars.