World Bank raises China growth forecast to 7.2 percent

By DPA,

Beijing : The World Bank Thursday raised its forecast for China’s annual economic growth to 7.2 percent, saying the country is posting “respectable” growth fuelled by the government’s four-trillion-yuan ($590 billion) spending package.


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“While China’s economy has continued to feel the brunt of the global crisis, very expansionary fiscal and monetary policies have kept the economy growing respectably,” the bank said in a quarterly report on China.

It raised its forecast for growth in China’s gross domestic product this year to 7.2 percent, up from 6.5 percent in its last quarterly report, while the government has said it still aims for GDP growth of about eight percent.

The infrastructure-centred spending package has spurred government-related investment this year, accompanied by a surge in new bank lending and continuing growth in domestic consumption, the World Bank said.

But market-based investment has lagged behind and “very weak exports have continued to be the main drag on growth”, it said.

“Growth in China should remain respectable this year and next, although it is too early to say a robust sustained recovery is on the way,” said Ardo Hansson, the bank’s lead economist for China.

“However, there are limits to how much and how long China’s growth can diverge from global growth based on government influenced spending,” Hansson said.

The relative success of China’s stimulus package should give it “the confidence to focus on forward looking policies and structural reforms”, said senior economist Louis Kuijs, the report’s lead author.

“On current projections it is not necessary and probably not appropriate to add more traditional stimulus in 2009,” Kuijs said.

The report said China still needs to expand further its domestic consumption to offset flagging exports, raise the prices of some natural resources, and develop a “well-functioning public finance system and social safety net”.

Prime Minister Wen Jiabao Wednesday told a cabinet meeting that China’s economy was recovering steadily but stood at a “critical moment”, state media said.

Wen said the foundation for economic recovery was “not stable” with “many uncertainties” remaining, pointing to “sluggish exports, the fiscal deficit and trade protectionism”, the official Xinhua news agency reported.

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