European Commission says domestic demand remains main China growth driver

The European Commission's latest forecast puts China's expectedeconomic growth at 6.4 percent in 2017 and 6.2 percent in 2018, with the macroeconomic policy reacting to any significant weakening of momentum.

Chiina's growth was contained in the European Economic Forecast released on Monday in Brussels, saying Beijing's macroeconomic policy is likely to react flexibly to keep overall growth in the range of 6 to 6.5percent.

China will announce its growth target of 2017 when the annual session National People's Congress is held in first half of March.

Mainly driven by a strong consumption rebound, China's economy expanded by 6.7 percent in 2016, which is "only marginally down" on the 6.9percent growth recorded in 2015, the report said.

"Looking ahead, domestic demand is expected to remain the main growth driver in China," the report added.

"Household consumption is expected to continue to grow at a steady pace, supported by disposable income that is growing faster than economic growth, particularly in rural areas, by buoyant employment creation, and rising house prices."

But European Union warned in the report that the investment in China is expected to grow more slowly than in 2016, as private investment weakened throughout the course of 2016.

It forecast that only a significant expansion in investment by state-owned enterprises and a rebound in real estate investment prevented this slowdown from having a much more significant impact on economic growth.

But European Union said fiscal policy in China is expected to remain expansionary throughout the forecast horizon and to respond flexibly to any signs of weakness.

As to the European economy, for the first time in almost a decade, the economies of all EU member states are expected to grow throughout the entire forecasting period (2016, 2017 and 2018), though the outlook is surrounded by higher-than-usual uncertainty.

For the eurozone, the growth will remain at 1.6percent in 2017 and 1.8percent in 2018, slightly revised up from the autumnforecast on the back of better-than-expected performance in the second half of 2016 and a rather robust start into 2017.

The EU economyas a whole should follow a similar pattern and is forecast at 1.8percent this year and next.

For UK, however, the EU says its economic growth is projected to moderate in 2017 and weaken further in 2018, growing at 1.5 percent and 1.2 percent respectively, following 2 percent of growth in 2016.

Valdis Dombrovskis, vice-president of European Commission, said the economic recovery in Europe continued for the fifth consecutive year and in these uncertain times, however, it is important that European economies stay competitive and able to adapt to changing circumstances.

"This requires continued structural reform effort. We also need to focus on inclusive growth, ensuring that the recovery is felt by all," said Dombrovskis on Monday.

"With inflation picking up from low levels, we cannot expect current monetary stimulus to last forever. Therefore countries with high deficit and debt levels should continue bringing them down to become more resilient to economic shocks."