Mr Liu, speaking to a meeting of the World Economic Forum in this northern port city, gave no timeframe for the expected slowdown, which he said would be a welcome development.

'The growth rate will come down from 11 per cent to 9.5 per cent or something like that - 9 per cent or something,' said Mr Liu, who heads the China Banking Regulatory Commission.

'I think that's good for China. China doesn't need speed first. It needs quality first.'

Markets are uneasy that the economy is slowing too sharply under the impact of drooping demand for China's exports and tight domestic credit conditions that have taken a particularly heavy toll on the property sector, which accounts for nearly a quarter of fixed-asset investment.

The economy expanded a blistering 11.9 per cent in 2007, prompting the central bank to tighten monetary policy late last year to curb inflation.

The policy has worked. Consumer inflation has fallen to 4.9 per cent in the year to August from a 12-year peak of 8.9 per cent in February, while gross domestic product growth slowed to 10.1 per cent in the second quarter from a year earlier.

Fearing growth could slow too much as the global credit crunch intensifies, the People's Bank of China surprisingly cut bank lending rates last week for the first time since 2002.

Mr Liu expressed confidence about the outlook, saying the underlying drivers of growth were intact.

China's vast, underdeveloped inland provinces still had huge needs for infrastructure investment, while domestic consumption had great potential to grow as the incomes of China's 1.3 billion people were rising fast.

This domestic demand would make up the shortfall from weaker exports, Mr Liu said.

'The Chinese economy is quite okay because we have a lot of room to manoeuvre,' he said, but added, 'I do not mean that it will be an easy process.'

Turning to the turmoil in global financial markets, he said many bankers and regulators were falling into the trap that 'the grass is always greener on the other side and what is new must be good'.

China would be 'very cautious and very watchful' during the crisis, he said.

'The basic lesson is that China has already been opening its doors for 30 years and we've been learning from others almost every day. But we're finding that a lot of times what we learned the day before from our teachers was wrong', Mr Liu said. -- REUTERS