World Bank Raises China Growth Forecast
The World Bank raised its 2009 economic growth forecast for China from 6.5 percent to 7.2 percent due to its stimulus-driven investment boom but cautioned Thursday it was too soon to say a sustained recovery was on the way.
Beijing’s 4 trillion yuan ($586 billion) stimulus program will “strongly support growth,” the bank said in a quarterly report. The plan calls for shielding China from the global slump by pumping money into the economy through higher spending on public works.
However, trade and private investment will remain weak, consumption will slow and a full-fledged recovery has to wait for the global economy and demand for exports to rebound, the Washington-based lender 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,” Ardo Hansson, the bank’s lead economist for China, said in a statement.
China’s economy grew 6.1 percent in the first quarter from the same time last year, the strongest rate of any major country but below the government’s 2009 target of 8 percent and far from 2007’s explosive 13 percent.
Thursday was the first time the bank has raised its outlook for China since November, when it slashed its 2009 forecast from 9.2 percent to 7.5 percent. The bank cut that again in March to 6.5 percent.
The bank predicted growth in 2010 would rise to 7.7 percent.
Beijing’s stimulus plan will account for up to 6 percentage points of this year’s expansion — or the bulk of growth this year, it said.
The government spending has boosted Chinese investment in factories, real estate and other fixed assets by 32.9 percent in the first five months of the year.
Still, the bank cautioned there was a limit to how much China could buck global trends through stimulus spending while exports are weak. It warned that domestic consumption would slow despite the stimulus.
“There are limits to how much and how long China’s growth can diverge from global growth based on government-influenced spending,” the bank report said. “Market-based investment is likely to continue to lag for a while.”
May retail sales rose 15.2 percent from a year earlier, but the growth rate is falling, indicating Beijing has yet to spur a rebound in private spending.
May exports plunged by a record 26.4 percent from the same month of 2008. The contraction in exports this year will be so severe that it will drag down overall growth, the World Bank said. The collapse in trade threw millions of migrants out of work and it is unclear how many found new jobs on stimulus-funded projects.
The World Bank says it estimates each percentage point of lost growth in China’s non-agricultural gross domestic product growth means 5.4 million fewer jobs. There are no comprehensive data on China’s employment.
6/17/2009 11:09 PM JOE McDONALD AP Business Writer BEIJING