WTO entry will boost investment into China
The country's growth will drop to 7% in 2002 from 7.3% last year, the ADB report published on Tuesday said.
But the bank expected the effects of China's entry into the World Trade Organisation and the world's general economic recovery to boost growth to 7.4% in 2003.
China needs to see real growth of 5% a year if it is to keep labour unrest at bay.
A government think-tank - the State Development Research Council - has predicted that annual growth of 7-8% will be maintained between 2002 and 2005, and will only slow slightly over the following four years.
Industry gains
The country's industrial and service sectors are expected to notch up 8-9% annual growth over the next two years, the ADB report said.
But the good news may do little to mollify striking workers in the country's north-east rust belt.
They are the result of China's attempts to make its industrial sector more efficient as its lays of thousands of workers from the ailing state-owned enterprises (SOEs).
ADB's China representative, Bruce Murray, warned that urban unemployment was closer to 8% than the official estimate of 3.6% issued in 2001 because the latter does not include SOE lay-offs.
Rural woes
Agricultural growth will lag far behind the industries, at a sluggish 2-3%, according to the report.
Mr Murray said rural workers will be further hit by China's entry into the WTO as the country's most heavily-protected sectors - agriculture, automobiles, banking, insurance and telecommunications - will be the worst affected.
WTO entry will also mean that imports will continue to grow faster than exports, hitting 10% this year and 14% in 2003.
As a result, China's current account surplus will drop to 1% of GDP this year and slide to 0.4% in 2003, the ADB said.
However this will be partly offset by increased foreign investment as the government opens up China's markets in line with WTO requirements.
In a separate report released on Tuesday, the World Bank said another effect of China's WTO entry was likely to be increased difficulty in obtaining credit, as domestic banks conformed with international lending norms.
"Offsetting the negative real economy effects of a credit crunch while staying the course on banking reform will be a major challenge for the year ahead," the World Bank said.