World Bank ups China economic forecast
By Zhang Fengming |
November 4, 2010, Thursday
|
Print Edition
Print Edition
"SURPRISINGLY strong" growth in the third quarter, backed by sound domestic fundamentals, persuaded the World Bank yesterday to raise its forecast on China's economic growth for this year and next.
In its quarterly China report, the World Bank edged up its China economic growth projection to 10 percent from 9.5 percent. The forecast for next year was raised to 8.7 percent from 8.5 percent.
China's economy grew 9.6 percent in the third quarter, down from the sizzling 10.6 percent growth of the first half. But the decline was smaller than expected, prompting the World Bank to notch up its forecast.
"Growth may ease a bit further as global growth decelerates and the macro stance is normalized but it remains supported by the traditional growth drivers and a robust labor market," said Louis Kuijs, senior economist at the World Bank.
Meanwhile, the World Bank called for more interest rates increases in China to tame inflation.
China raised its interest rates on October 20, the first increase in nearly three years, to mop up liquidity against a nearly two-year high inflation of 3.6 percent in September.
The one-year benchmark deposit rate rose to 2.5 percent from 2.25 percent, while the one-year benchmark lending rate increased by the same 25 basis points to 5.56 percent.
Despite the rate increase, the de facto savings rate is still negative on the 3.6 percent inflation.
Meanwhile, property prices are unlikely to remain flat for long - despite government efforts to rein in the sector - given fundamental drivers such as rapid urbanization, sizable income growth and low interest rates, the Washington-based bank said.
China is broadly on track to normalize the overall monetary stance and meet the 2010 quantitative targets, the World Bank predicted.
China's banks are expected to extend loans to companies totalling 7.5 trillion yuan (US$1.12 trillion) this year, after liquidity grew at a record 9.6 trillion yuan in 2009.
"International liquidity poses challenges to monetary policy, but these should be more manageable in China than in some emerging markets," the World Bank said.
The World Bank lead economist for China, Ardo Hansson, said that further normalization of the macro-economic stance is needed to guard against macro risks.
"The key concerns are asset price increases, strained local finances and non-performing loans, and inflation risks can't be ruled out," Hansson said.
China's preparations for the 12th Five-Year Plan (2011-2015) call for focus on structural issues and reforms.
The World Bank said that China should rebalance to more domestic-demand-led growth, as the international environment is less favorable.
In its quarterly China report, the World Bank edged up its China economic growth projection to 10 percent from 9.5 percent. The forecast for next year was raised to 8.7 percent from 8.5 percent.
China's economy grew 9.6 percent in the third quarter, down from the sizzling 10.6 percent growth of the first half. But the decline was smaller than expected, prompting the World Bank to notch up its forecast.
"Growth may ease a bit further as global growth decelerates and the macro stance is normalized but it remains supported by the traditional growth drivers and a robust labor market," said Louis Kuijs, senior economist at the World Bank.
Meanwhile, the World Bank called for more interest rates increases in China to tame inflation.
China raised its interest rates on October 20, the first increase in nearly three years, to mop up liquidity against a nearly two-year high inflation of 3.6 percent in September.
The one-year benchmark deposit rate rose to 2.5 percent from 2.25 percent, while the one-year benchmark lending rate increased by the same 25 basis points to 5.56 percent.
Despite the rate increase, the de facto savings rate is still negative on the 3.6 percent inflation.
Meanwhile, property prices are unlikely to remain flat for long - despite government efforts to rein in the sector - given fundamental drivers such as rapid urbanization, sizable income growth and low interest rates, the Washington-based bank said.
China is broadly on track to normalize the overall monetary stance and meet the 2010 quantitative targets, the World Bank predicted.
China's banks are expected to extend loans to companies totalling 7.5 trillion yuan (US$1.12 trillion) this year, after liquidity grew at a record 9.6 trillion yuan in 2009.
"International liquidity poses challenges to monetary policy, but these should be more manageable in China than in some emerging markets," the World Bank said.
The World Bank lead economist for China, Ardo Hansson, said that further normalization of the macro-economic stance is needed to guard against macro risks.
"The key concerns are asset price increases, strained local finances and non-performing loans, and inflation risks can't be ruled out," Hansson said.
China's preparations for the 12th Five-Year Plan (2011-2015) call for focus on structural issues and reforms.
The World Bank said that China should rebalance to more domestic-demand-led growth, as the international environment is less favorable.
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