China's economic growth is likely to slow to 7.4% in 2014

China's economic growth is likely to slow to 7.4% in 2014 from 7.7% last year due to the government's drive to curb credit risk and excessive factory capacity.

The OECD said that in November, the Organization for Economic Cooperation and Development had predicted China's economic growth could accelerate to 8.2% in 2014.

The OECD attributed the slower growth forecast to Beijing's efforts to rein in the shadow banking sector, overcapacity in such industries as steel and cement and a cooling property market. Many real estate developers and local governments have relied on shadow banking credit such as trust loans and other forms of off balance sheet borrowings to stay liquid.

China's government has in recent weeks hastened construction of railways and affordable housing and cut taxes for small firms in a bid to support the slowing economy but Premier Li Keqiang has ruled out any forceful measures.

The OECD report said that investment may slow more than projected if the supportive measures fail to counterbalance the effects of the phasing out of excess capacity and the anti-corruption campaign. Consumption may also surprise on the downside if a cooling property market were to damp housing related spending and weak income growth were to curtail spending on durables.

The latest Reuters poll showed China's growth could slow to 7.3% this year, the weakest showing in 24 years and slower than the official target of 7.5%. Beijing's efforts to tackle factory overcapacity and pollution have hit output, while a sustained anti-corruption campaign has hurt consumption, especially of high end goods.

The government is trying to restructure the economy so it is driven more by consumption than the traditional engines of exports and investment, but wants to avoid a sharp slowdown that could fuel job losses and threaten social stability.

The OECD said that the pace of structural reforms will influence short-term outcomes, the challenge being to keep up sufficient momentum to reduce imbalances whilst avoiding overly abrupt adjustments that might trigger a crisis.