World Bank sees China recovery this yearBeijing's injection of 4tn yuan into economy is likely to secure 6.5% growth and help pull rest of Asia out of slump, World Bank predicts
Jonathan Watts in Beijing
guardian.co.uk, Tuesday 7 April 2009 15.48 BST
The Chinese economy is likely to recover by the second half of this year and could help to pull Asia out of its slump, the World Bank forecast today.
Despite the contraction in overseas markets, the bank said the Chinese government's pump-priming measures would enable the country to secure a growth rate of 6.5% this year.
"A ray of hope may be emerging with signs of China's economy bottoming out by mid-2009," the bank said. "A recovery in China, fuelled largely by the country's huge economic stimulus package, is likely to begin this year and take full hold in 2010, potentially contributing to the region's stabilisation, and perhaps recovery."
With gross domestic product (GDP) in other leading industrialised nations expected to contract, growth in China this year will be a welcome boost to the world economy and further evidence of its increasing influence.
China has grown used to double-digit growth for most of the past 30 years, but its export sector, which accounts for 40% of GDP, has been hurt by the decline of demand from Europe, North America and Japan. In February, exports declined by 25.7%.
To make up for the shortfall, the government is pumping 4tn yuan (£396bn) into spending on public works, consumer subsidies and other economic stimulants.
President Wen Jiabao has said further pump-priming is possible if the world economic crisis shows signs of worsening. Several analysts expect a further package or interest rate cut later this year.
"The Chinese authorities have done an incredible amount," Vikram Nehru, the World Bank's chief east Asia economist, told reporters. "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."
After sharp declines for two quarters, there have been tentative signs of stabilisation in the past week as stimulus spending courses through the financial bloodstream.
Bank lending has increased and demand has grown for steel and power. In March, the official purchasing managers' index – a key indicator of manufacturing activity – rose for the first time since September.
But as long as the export sector is in freefall, the economic outlook will remain turbulent. |
