The Organization for Economic Co-operation and Development (OECD) has predicted that the Chinese economy would grow by 8 percent in 2005, saying a restrictive economic policy would lead to a slowdown.
"After a period of rapid expansion that continued to the beginning of 2004, economic activity marked its step in the middleof the year to get energy at the second semester," said the OECD in a twice-yearly outlook report published on Tuesday.
According to the OECD, despite restrictive government credit policy to companies, the production was taken to 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," it said.
The organization said the tiny rise of interest rate at the endof October announced by the Chinese central bank will have little impact when effective interest rate following the credit rationingis higher than official rates.
It forecast a continuous inflation due to hike in foods' and raw materials' prices and put it at 4.0 percent in 2005 and 2006 compared with 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.
It added that China remained competitive due to its stable exchange rate, flat unit labor costs and the removal of textile quotas next year.
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."