OECD cuts China's growth forecast over EU risks

China's economy is set to grow at 8.5 percent next year while the euro zone crisis will continue to pose threat to China's export sector, the Organization for Economic Cooperation and Development (OECD) said on Tuesday.

The Paris-based organization lowered its growth forecast for China next year from its prediction of 9.3 percent in May, noting that external risks will likely to adversely affect growth in China.

"Going forward, the economy will still face external headwinds," the OECD said in its latest economic outlook report. "But housing and infrastructure outlays are likely to revert to their longer-term trend."

The organization forecast that China's growth may slow down by 0.6 percentage point in 2013 and 1.3 percentage points in 2014 if the euro zone crisis worsens.

The total volume of imports by euro area countries from non-euro area countries has fallen by 3.25 percent between the first and second halves of 2011, and by a further 2.75 percent in the first half of 2012, according to the report.

"The euro area crisis remains a serious threat to the world economy despite recent measures that have dampened near-term pressures," the OECD said, noting that much more is needed to ensure long-term sustainability, including structural reform in both deficit and surplus countries in the euro area.

With China's domestic demand gathering renewed momentum, the country's current account surplus is set to shrink to 2.25 percent of its GDP by 2014, compared with the peak of 10 percent in 2007, the report said.

The OECD also noted that the easing of China's macroeconomic policy stance from mid-2012 is set to support near-term growth. But it warned that China's export growth is likely to remain subdued with growth not exceeding 9 percent during the next two years by past standards.