China's economic growth will probably cool next year to the lowest annual rate in a decade, setting the pace for an Asia-wide slowdown as global demand fades, a Reuters poll released on Thursday showed.

But economists saw little risk of a severe slump. The slowdown should be modest and Asia's policymakers have room to ramp up government spending or lower official interest rates in case the outlook worsens.

Although China's 2012 growth will probably dip below 9 percent, none of the 30 economists surveyed thought it would breach the 8 percent line seen as the minimum for assuring sufficient job creation to keep up with urban migration.

Contrary to what appears to be the dominant view among investors, we don't see recession anywhere in Asia, Deutsche Bank's Asia economist Michael Spencer said.

Asia is heading into a period of six to nine months of below average growth, reflecting mostly the deceleration of activity in the advanced economies, he said.

Weak growth in the United States and Europe is already crimping exports across Asia, and economists have penciled in a sharper slowdown in the coming quarters.

Slower growth should bring inflation relief. The consensus view among economists now shows India as the only country in the polling region likely to increase interest rates in 2011.

In the previous quarterly poll, conducted in July, economists had predicted more rate rises by the end of 2011 in India, Indonesia, Thailand, Taiwan, Malaysia, New Zealand, Australia and South Korea.

The Reserve Bank of India will probably raise rates at its meeting next week, but that is widely expected to be the last move in its aggressive tightening cycle. Economists expect two quarter-point cuts in 2012.

Indonesia already lowered rates in a surprise move on October 11, and the poll shows economists expect one more trim in 2012. New Zealand is the only country in the survey where economists expect a rate increase in 2012.


China is the linchpin. If its 2012 growth slows to 8.6 percent, as the consensus forecast predicts, the rest of Asia would feel a modest ripple. If China's growth falls more sharply, Asia could take a direct hit.

A 1 percent decline in China's GDP reduces growth in Singapore, Malaysia and Thailand by 0.7 percentage points, and in Indonesia by 0.3 points, Bank of America-Merrill Lynch economist Hak Bin Chua said.

The scale of the impact has almost tripled over the past two decades, he said, because China now imports far more than it used to from its Asian neighbors.

The impact of a China slowdown is still estimated to be less than that of a U.S. slowdown or recession, but the two are converging and are likely to be comparable within the next decade, Chua added.

Compared with the July poll, economists lowered 2012 growth forecasts across the board. Among the sharpest cuts were those for Malaysia and Singapore, two of the countries most closely tied to the global economy.

The forecasts show annual growth rates accelerating in 2012 in Australia, New Zealand, India, South Korea, Thailand and the Philippines. Next year's growth rate will likely trail 2011's in Indonesia, Singapore, China, Hong Kong and Taiwan.

(Editing by Ramya Venugopal)