Chinese growth is likely to slow to 8.2% this year, its weakest in more than a decade, before government support helps it rebound to 9.3% in 2013, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.
The OECD cut its growth forecast for the world's second-largest economy from 8.5% made last November. That is still higher than a government target of 7.5% for 2012.
"As the inventory cycle turns, and fiscal and monetary policy become more expansionary, growth should pick up in the course of 2012 and stabilise at over 9% in 2013," the Paris-based body said in its biannual outlook.
Increased policy support and an expected recovery in the global economy could lead to a rebound in activity in China in the second half of 2012, it said.
The OECD said the government, which has signalled a willingness to take action to halt the slowdown, was likely to step up investment in key infrastructure projects if growth weakened in the current quarter.
Data for April, including factory output and fixed-asset investment, suggests growth has weakened from the first quarter, when it hit a three-year low of 8.1% in annual terms.
The OECD expects the central bank to ease policy further and boost bank credit for first-time home buyers and sound property developers, which could help stabilise the property market.
The People's Bank of China has cut the amount of cash banks must hold as reserves three times since November to crank up lending. Analysts polled by Reuters expect further cuts in reserve requirements and more fiscal measures to support the economy.
Full-year annual inflation is expected to fall to 3.3% in 2012 from 5.5% last year, the OECD said. Inflation could fall further 2.9% in 2013.
The OECD projected China's current-account surplus as a%age of gross domestic product would fall to 2.3% in 2012 and 1.7% in 2013.
Meanwhile, China could forge ahead with financial reforms to free up bank lending and deposit rates and allow more private investment in the banking sector, the OECD said.
"Capital outflows should be liberalised with appropriate sequencing so as to help create a more balanced two-way market for renminbi (yuan)," it said.
