Growth of China's gross domestic product (GDP) is expected to slow from around 10.5 percent this year to 9.25 percent next year as a result of the government's macro-economic controls, according to a report released by a Chinese research institute.

The report, jointly completed by the Institute of Economics of Renmin University and China Chengxin Credit Management Co. Ltd, said after peaking this year, the growth of the country's GDP is expected to decline with implementation of more stringent macro-controls next year.

According to its estimates, China's GDP will grow by 10.48 percent this year, with investment in fixed assets up 27 percent, Consumer Price Index (CPI) up 1.5 percent, the M1 up 14.9 percent,the M2 up 17.2 percent, imports up 27.2 percent and exports up 23.4 percent.

China's GDP growth began to decline in the second half of this year, showing that the macro-economic control policies aiming to cool down the economy has taken effect and the trend is likely to continue next year, said the report.

The report predicted that China's investment in fixed assets will grow by 23 percent next year, 3.65 percentage points lower than the annual average from 2003 to 2006.

The decline in the growth of fixed asset investment may lead toweakness in investment-driven growth and cause some resources sectors to become idle, warned the report.

The report said a growth rate of fixed asset investment rangingfrom 25 to 27 percent is desirable.

According to the report, slowing the monetary supply and liquidity surplus in China's banking system will be major problemsthat need to be solved next year.

Threats of deflation may emerge next year if the expansion of aggregate demand weakens, said the report.

The report suggested that over the short term, China's macro-economic control policies should focus on preventing an excessive decline in growth of the GDP, fixed asset investment andmonetary supply.

A greater percentage of the central and local governments' budgets should go to the public sector in China's vast rural area,said the report.

According to the report, money lending should be loosened so that growth of the monetary supply will be in line with the growthof GDP and CPI.

The appreciation of the RMB and the floating band of 0.3 percent against other currencies should be expanded so that the real appreciation is between three and five percent, said the report.

Over the middle and long term, the report suggested stricter requirements for land and lending, while higher standards for market access are required to ensure better energy efficiency and pollution reduction goals are reached.