The Asian Development Bank (ADB) slashed its growth forecast for China and the Asian region, citing the need for Beijing to continue with its economic, financial and capital market reforms to sustain growth.

The ADB cut the growth forecasts for some of the region’s biggest countries including China, India, South Korea and Indonesia in its latest annual Asian Development Outlook, a report which covers the region’s 45 economies, released on September 22.

ADB chief economist Wei Shangjin tells The Asset, “The growth projections for developing Asia are revised down for this year and next year because of lower-than-expected growth in China and India, and slower-than-expected recovery in the advanced economies.”

The Chinese economy, which grew by a revised 7.3% last year, is now tipped to grow by 6.8% in 2015 and 6.7% in 2016. That’s down from previous forecast of 7.2% and 7%, respectively.

The ADB’s chief economist says that the weaker growth in China should not impact potential initial public offerings (IPOs), but it may impact companies that are already listed depending on the sector they are in.

“China’s growth projection of 6.8% for 2015 is still within the ball-park of the government’s target of about 7%,” says Wei. “Given the size of the economy and still high growth rate, the number of firms which want to and are ready to do IPOs is not likely to be affected too much. For companies already listed, sector affiliation matters. Given the structural transformation going on in the economy, firms focusing on consumption and services have a good chance to see rapid expansion. On the other hand, firms focusing on manufacturing and exports may have a more challenging adjustment to make.”

In order to put the economy on a growth path and avoid a hard landing, China must continue in its efforts to rebalance the economy and shift from a manufacturing-based economy to a consumer-led model. “The government needs to continue to pursue pro-market reform in a number of areas to facilitate financial and human resources to flow to the most productive firms. In addition, reforms in the education, legal, and financial areas to encourage more innovations will also be a key for future growth,” says Wei.

Wei also urged the Chinese government to gradually allow market forces to drive its foreign exchange market, pointing out that the move will be positive for the export sector in the region.