- China - Economic growth
AFP - The World Bank Tuesday slashed China's economic growth forecast to 6.5 percent in 2009 but said the Asian giant was resisting the global economic firestorm with solid fundamentals.
"As the global crisis has intensified, China’s exports have been hit badly, affecting market-based investment and sentiment, notably in the manufacturing sector," the World Bank said in releasing a quarterly report on China's economy.
In sharply lowering its previous 7.5 percent growth estimate for the Asian giant, the World Bank noted it followed recent downward revisions for global gross domestic product (GDP) growth in 2009.
According to the latest World Bank global forecasts, published in December, the world economy would expand at a weak annual rate of 0.9 percent in 2009, with a 0.1 percent contraction in developed economies offset by growth in developing countries of 4.5 percent.
A Chinese government think tank this month forecast first-quarter growth would slow to 6.5 percent from a 6.8 percent pace in the fourth quarter last year.
"China is a relative bright spot in an otherwise gloomy global economy," said the World Bank’s country director for China, David Dollar.
"Shifting China's output from exports to domestic needs helps to provide immediate stimulus while laying the foundation for more sustainable growth in the future."
The World Bank said that China's banks "have been largely unscathed" in the global financial turmoil that accelerated after the collapse of US investment bank Lehman Brothers in September.
"The economy still has plenty of space to implement forceful stimulus measures," said the Washington-based development lender.
Chinese Premier Wen Jiabao said last week that China has made plans to inject more money into the economy, admitting the global crisis was making this year's growth target of about 8.0 percent hard to achieve.
The Chinese government unveiled an unprecedented four-trillion-yuan (580-billion-dollar) stimulus package in November.
British Prime Minister Gordon Brown said Monday he believed China would agree on the need for new fiscal and monetary measures to tackle the global downturn at the April 2 Group of 20 summit in London.
The World Bank underscored that while China's economic growth outpaces that of most other countries, GDP growth at an annual rate of 6.5 percent "is significantly lower than potential growth."
According to the bank's latest "China Quarterly Update," the slowdown would probably lead to weaker investment, lower job growth, less migration and downward pressure on prices, among other results.
With global trade volumes falling sharply, China's export-driven economy would turn increasingly to its domestic market.
Still, China was likely to continue to outgrow most other countries, supported by solid macroeconomic fundamentals, stimulus policies, banks' willingness to lend, "fairly resilient" private consumption and accelerating government-influenced investment.
The World Bank noted that China’s "economic fundamentals are strong enough to look beyond 2009."
China’s robust economic fundamentals make "a strong case" for expansionary policies. But there may be a case for less emphasis on short term growth and more on longer term issues.
Dollar welcomed recent initiatives to stimulate consumption and government spending on health, education, and social protection measures but said there was room to do more.
Social instability from the economic slowdown was unlikely as long as the government provides a sturdy social safety net, according to the study.
"Somewhat lower growth is not likely to jeopardize China’s economy or social stability," said Louis Kuijs, the report’s main author and senior economist, "especially not if the adverse consequences of the downturn for employment and people’s livelihoods can be limited through the social safety net, preferably combined with education and training."
Kuijs suggested that China place less emphasis on targeting short-term GDP growth that would allow more scope to rebalance the economy, pursue reforms and improve the quality of growth.