World Bank Raises Economic Forecast for China

By Kari Jensen

18 June 2009

The World Bank says China's economy will grow faster than expected this year, but cautions it is too soon to say a sustained recovery is imminent.

The World Bank raised its estimate of China's gross domestic product growth this year to 7.2 percent, up from the 6.5 percent projected in March.

Jumpstart

A crane hoists construction material in front of a backdrop of high rising buildings, Wednesday in Shanghai, China, 17 Jun 2009
In its quarterly report released Thursday, the Washington-based lender credits China's $586 billion stimulus program with supporting growth by increasing investment in factories, real estate and public works.

Jing Ulrich, the managing director and chairman of China equities for the investment bank JP Morgan in Hong Kong, says the stimulus program helped jumpstart the world's third-largest economy.

"Now, going forward, the most important thing to watch out for is whether the Chinese domestic consumption can hold up in the face of declining exports," she said. "We think domestic consumption is going to recover incrementally in the next few quarters, mainly because confidence is recovering very strongly in the Chinese economy."

Strong growth

China's economy grew 6.1 percent in the first quarter from the same time last year. That is 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.

However, the World Bank cautions that more robust growth in China will have to wait until the global economy and demand for exports also rebound. It says China's trade and private investment will remain weak and consumption will slow.

Ulrich says as the world economy recovers, China's exports also will recover.

"Clearly, that's the case. China is the second-largest exporter in the world and what happens in the regional economies, what's happening in the U.S. and Europe really matter a great deal to the Chinese economy," she added. "However, we also must keep in mind, the Chinese economy is fast. It's got 1.3 billion people. Domestic consumption and domestic fixed-asset investments are becoming much more important going forward."

The World Bank predicts China's growth in 2010 will rise to 7.7 percent.