Just as the 88th floor of the Grand Hyatt in Shanghai offers unrivalled views of China's biggest city, the buzz in the hotel's coffee shops yields early soundings on the country's economic future.

"The rest of Asia is clearly in trouble," says Charles Marshall, managing director of the Asia Division of Lowe Enterprises, a US real estate company.

"China has got them nailed from the top and the bottom; it has the cheap, efficient labour and also the intellectual talent. This country is turning out PhD's by the hundred every year," he adds, as he sits on the hotel's 54th floor watching freighters churn up the Huangpu river.

Such predictions are common now among foreign businessmen in China. They help to explain why the Grand Hyatt and several other five-star hotels in Shanghai were fully booked throughout much of November - despite a slump in airline business and a pronounced economic slowdown in the West.

China in 2002 will be buffeted by conflicting influences. Foreign direct investment (FDI) is expected to remain strong, even as exports come under pressure. Faced with the uncertainties that will come from implementing reforms ordained by China's accession to the World Trade Organisation, Beijing is expected to do all it can to stimulate domestic growth.

Most economists predict that growth this year will come in at around 7 per cent, or slightly higher. For next year, the forecasts are generally in the range of 6.5 per cent to 7 per cent - far outstripping the rest of the region but relatively lacklustre by China's own standards. Between 1980 and 2000, the economy grew at an average annual rate of 9.7 per cent, according to official figures.

"China can sustain superior growth [in 2002] vis a vis the region as a whole, and at a level that will sustain confidence for those investing in the country," says Pu Yonghao, senior economist at Nomura Asia in Hong Kong.

It is not only the promise that WTO accession - expected on December 11 - will lead to a gradual opening of markets long closed to outsiders. Foreign companies are also being drawn to China by the waning attractiveness of south-east Asian economies hit by a slump in exports, dwindling GDP growth, shaky financial systems and the threat of social strife.

Thus, manufacturers such as Hitachi, Motorola and Hewlett Packard have all recently decided to move manufacturing capacity to take advantage of China's low costs in an intensifying competitive environment. Several semiconductor manufacturers are engaged in building plants to make integrated circuits more cheaply than anywhere in the world in Shanghai, and more are expected.

Foreign banks and other financial services companies are in talks to buy strategic stakes in their domestic counterparts, heralding what some see as a mini-boom in foreign involvement in China's largely closed financial system.

All this, analysts say, will be enough to maintain the underpinnings of FDI growth. Mr Pu predicts FDI this year at $48bn, up 18 per cent from last year. In 2002, he says, it could rise a further 12 per cent to $54bn, even allowing for the negative effects of the global economic slowdown.

The trade surplus, however, is expected to come under pressure. Exports are generally forecast to continue weakening in the fourth quarter of 2001 and in early 2002, but perhaps holding up relatively well because of their price competitiveness. Government economists predict export growth this year at around 5 per cent or less, down from a blistering 27.8 per cent surge in 2000.

Such a lacklustre performance will hit the trade surplus, which in the first 10 months of this year fell 25 per cent from last year to $17.33bn. Nevertheless, Xiang Huaicheng, the finance minister, was adamant in an interview with the Financial Times in November that the renminbi, the Chinese currency, would not be devalued.

With this backdrop, the state council (cabinet) stands ready to launch another large fiscal stimulus package in 2002 - marking the fifth consecutive year of strenuous pump priming. Mr Xiang told the FT that Rmb150bn in special infrastructure bonds will be issued next year to fuel domestic demand and mitigate the effects of rising unemployment.

Some analysts believe that if growth fell to around 6 per cent or lower - a level generally recognised as a danger mark in China - the government could decide to top up its stimulus package with another Rmb50bn.

With around 150m people in the countryside at least seasonally out of work and swelling millions of unemployed in the cities, Beijing fears that subsiding growth could ignite social tensions.

And while the inflow of FDI is a boon to growth, the efficiencies that foreign companies bring with them generally prompt cost-cutting and redundancies among domestic competitors, many of which are lumbering state-owned enterprises that still employ around 55 per cent of urban workers.

Thus China will be faced with a delicate balancing act in 2002. It will have to keep domestic consumer spending strong while jobs fall under threat and export growth subsides. This may prove difficult if the rural economy, which comprises some 900m people, remains mired in problems ranging from oversupply to heavy indebtedness.

Deflation, which stalked the economy during the Asian crisis but has been receding since mid-2000, may also reappear as the price of imported goods fall. In September the consumer price index fell 0.1 per cent - its first negative reading since May 2000.