Citing lower investment in fixed assets in 1999, director of the department of comprehensive affairs of the state economic and trade commission (SETC), Ma Jiantang said China's gross domestic product (GDP) is expected to grow by 7 to 8 per cent next year.

He said investment in fixed assets is forecast to grow between 10 and 15 per cent next year, less than the 17 per cent to 18 per cent increase this year, reports China Daily.

This year, China set a target of 8 per cent GDP growth. However, the growth rate slipped one full percentage point during the first half of the year when the economy grew only by 7 per cent. In 1997, China attained a growth rate of 8.8 per cent.

However, Ma expressed confidence in China's ability to attain the targeted 8 per cent growth thisyear.

Experts say China has reacted quickly to the Asian financial crisis to ensure 8 per cent growth in 1998 with enhanced spending on infrastructure projects such as railways, highways, power plants and agricultural facilities.

To stimulate consumer demand, the central bank recently announced a cut in interest rates for bank deposits and loans.

But, Ma says the slower growth rate of 7 to 8 per cent next year would be conducive to China's readjustment of industrial structure.

He also says that readjustment of the industrial sector has become a prominent economic issue.

China's textiles, coal mining, metallurgy, building materials and light industries are plagued by unreasonable structures, Ma says and calls for readjustments with corresponding reforms in the investment, financing and social security sectors.

The Asian financial crisis, according to Chinese economists, has not had much of a direct impact on its economy. One reason is the Chinese yuan at present is convertible only under thecurrent account but not the capital account. Further, China enjoys a favourable foreign exchange balance with adequate foreign exchange reserves.

However, they say the indirect effects of the Asian financial crisis should not be overlooked.

The crisis has forced some Asian countries to devalue their currencies, making their export goods cheaper than China's.

Chinese exports to southeast Asian countries so far this year have decreased in volume by varying degrees owing to currency devaluation in these countries.

But latest statistics from the ministry of foreign trade and economic cooperation points out that China's exports to Europe and the United States have picked up.

In the first five months of 1998, Chinese exports to the US reached $13.34 billion, up 18.1 per cent over the corresponding period last year. Exports to EU during the first five months were worth $10.68 billion, up 25.5 per cent over the same period in 1997.

Considering China's enormous size, the country is not entirely dependenton exports for economic growth, Chinese experts say.

Experts say China, with its 1.2 billion population, is itself a huge market.

They say China can achieve sustained economic growth by stimulating domestic demand.

According to Liu Guoguang, vice-president of the Chinese Academy of Social Sciences, measures initiated by the government to stimulate the economy are beginning to play their roles in the second half of the year.