AGENCE FRANCE-PRESSE and BLOOMBERG in Beijing

China's economy will grow by 8 to 8.5 per cent next year, according to a research report by a government think-tank quoted in the Beijing-based China Securities Journal yesterday.

"Considering slowing investment and considerably cooling export growth, China's GDP [gross domestic product] growth will slide to 8-8.5 per cent next year," the National Development and Reform Commission's macroeconomic research department said.

The commission's report predicts an 18 per cent increase in investment next year, with consumer price index growth of about 3 per cent, and retail sales - adjusted for inflation - up about 9.5 per cent.

China's exports should grow about 15 per cent next year, the commission said.

This year's growth in GDP is expected to come in at 9 per cent, with retail sales on an adjusted basis up 10.5 per cent and exports up 28 per cent.

Imports are expected to rise about 30 per cent this year, creating a slight trading surplus for China, according to the report. It said full-year fixed-asset investment growth should be around 22 per cent this year.

In the first nine months of the year, China's gross domestic product expanded by 9.5 per cent compared with the same period last year. Urban fixed-asset investment was up 29.9 per cent and rural investment up 16.9 per cent.

Over the same period, retail sales climbed 9.7 per cent year on year on an adjusted basis while exports rose 35.3 per cent.

Commission researchers said Beijing should maintain its macroeconomic controls on overheated sectors such as steel and real estate, while adopting a relatively loose credit policy for other industries, especially small and medium-sized enterprises.

The report warned that some "unstable and unhealthy" factors still existed in the economy, pointing out rebounding fixed-asset investment and the shortage of working capital for small and medium-sized firms.

Meanwhile, Su Ning, a vice-governor of the People's Bank of China, said the country still faced inflationary pressure - and warned it should not be underestimated after inflation eased in September for the first time in seven months.

Inflation slowed to 5.2 per cent in September from a seven-year high of 5.3 per cent in each of the previous two months. Mr Su estimated consumer prices rose 4.8 per cent year on year last month, and forecast inflation of 4.3 per cent for this month and 4.2 per cent for next month.

"The recent decline in the inflation rate is mainly because of a higher base last year and doesn't mean real consumer prices are falling," Mr Su said in a speech on Sunday at a forum organised by the National Bureau of Statistics in the eastern coastal city of Suzhou .

The central bank raised interest rates for the first time in nine years last Thursday, stepping up government efforts to rein in investment and dampen inflation in the world's seventh-largest economy.

The bank said it was seeking to replace administrative controls, such as lending bans, to consolidate progress made in cooling the economy.