A United States economic professor says the country is headed for a severe recession that could cause China's economic growth to slide to 8 percent.

And the decline could make Beijing less willing to let the yuan appreciate.

"The downside risk to growth will emerge in China because of the US recession," said Nouriel Roubini, a former White House aide and economics professor at New York University's Stern School of Business who spoke at a business lunch in Hong Kong yesterday.

"If exports and growth slow, the willingness of China to let the yuan appreciate will be less," he said.

Roubini, who is chairman of the economics website, www.rgemonitor.com, believes the US is already in a recession that will last until the middle of next year.

While US gross domestic product grew 0.6 percent in the first quarter, he said that was due to a build-up of unsold goods. He went on to say the number masks an underlying recession as residential and non-residential investment and corporate capital expenditure are falling, and that total employment has declined for four consecutive months.

The US housing recession is the worst since the Great Depression, and house prices, which have fallen 15 percent from their peak, could be down 30 percent from their peak by the end of 2010, he said.

China is cushioned by domestic demand and should avoid a hard-landing, but it will still see economic growth slide to 8 percent or slightly below, ending four years of more than 10 percent growth, Roubini said.

Reuters

(HK Edition 05/09/2008 page2)