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China on recovery path: World Bank

THE World Bank expects China to move toward recovery around the middle of the year and help the developing economies of Asia counter the weakest growth rates in more than a decade.

The World Bank said yesterday that a resurgence in China - "a bright spot in the region and the global economy" - is likely to begin this year and hit full stride in 2010, potentially contributing to regional stabilization and perhaps recovery.

Developing East Asian economies, which exclude markets like Japan, Hong Kong, Taiwan, South Korea and Singapore, will expand 5.3 percent this year, less than a December estimate of 6.7 percent, the Washington-based international institution said in its semi-annual report yesterday. Growth was 8 percent last year.

"As countries in the East Asia and Pacific region prepare themselves for an expected surge in joblessness resulting from the global slowdown, a ray of hope may be emerging with signs of China's economy bottoming out by mid-2009," the World Bank said.

"Unless there is a further intensification of the contraction in global demand, or global financial tensions flare up again, growth in China will pick up in the second half of the year, partly offsetting the weak first half."

There are several reasons for at least some optimism, economists said earlier. China's Purchasing Managers Index moved into an expansionary range for the first time in six months in March, indicating that the economy may be about to rebound.

China earlier announced a 4-trillion-yuan (US$586 billion) stimulus package to revive economic growth, scrapped lending quotas to thaw liquidity and increased tax rebates to arrest a slump in exports. But earlier this month, the World Bank reduced its forecast for China's 2009 economic growth to 6.5 percent from a December estimate of 7.5 percent.

The Chinese government is targeting what it calls a "challenging but manageable" 8 percent growth rate this year, after 9 percent growth last year.

"The Chinese authorities have done an incredible amount," said Vikram Nehru, the World Bank's chief East Asia economist, in a video conference from Tokyo. "What we're seeing in China is a willingness to take all the necessary action to make sure the economy continues to grow at a relatively rapid pace."

Chinese Premier Wen Jiabao said last month the government was ready to expand its stimulus if the impact of the global crisis worsens. He said China has "reserved adequate ammunition," though he gave no details.

The World Bank and International Monetary Fund have predicted a decrease in the global economy this year, the first such drop since World War II.

With China still heavily reliant on exports to global markets that continue to contract, the World Bank warned that a truly sustainable recovery in the East Asia and Pacific region ultimately depends on developments in the advanced economies.

Still, developing East Asian economies will grow faster than other emerging-market regions such as Latin America, the World Bank concluded in its report.


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