After 2006 China's economy could encounter a modest downturn
with GDP growth slowing from the present 10.4 percent to 9.6
percent in 2007 and 8.7 percent in 2008, said a World Bank (WB)
report issued on Wednesday.
The WB released its annual report -- Global Economic Prospects 2007 -- in
Beijing on Wednesday. It gives a medium-term view for China's
economy in a special section on regional economic prospects.
Continued robust investment demand and a pickup in private
consumption should keep China's GDP growth at high levels, says the
report. "China's economy remains favorable in the coming years,"
said report author, Richard Newfarmer.
According to the document China's export growth rates are
projected to decelerate toward 14 percent in 2008. This is lower
than the estimated 20.3 percent increase in the year 2006. Mr
Newfarmer said the modest slowdown wasn't a bad thing and would
help ease pressure on China's economic growth.
The report also indicates that in coming years signs of the
economy overheating would be limited to specific sectors and
regions. While production capacity continued to expand in line with
demand, inflation remained low and the current account was in
surplus -- all of which augured well for a soft landing.
But the report also suggested that high investment rates and
excess capacity in several sectors dominated by state-owned
enterprises would leave open the possibility of a sharp decline in
investment. In 2006 China made efforts to contain its soaring
investment and balance the economy.
Rapid investment growth and a surge in exports as new capacity
came on stream saw the Chinese economy expand by 10.7 percent
year-on-year in the first nine months of 2006.
Investment demand in the country was particularly strong in the
first half of 2006 but the WB report states that China's efforts to
contain investment via tighter monetary policy and sector-specific
administrative measures had resulted in a modest slowdown of GDP in
the third quarter to 10.4 percent.?
The WB also said that robust expansion in credit and money
supply, in part fueled by a strong balance of payment inflows,
helped support acceleration in domestic demand. The contribution
from this demand to growth increased to an estimated 7.3 percent in
2006. This is up from 5.6 percent in 2005.
In the first nine months of 2006 China's trade surplus increased
to US$110 billion. This is higher than the total for all of 2005
and international reserves have exceeded US$1 trillion.
Owing to years of an annual export growth of more than 20
percent China has overtaken the US as the world's second-largest
exporting nation over this year, according to the WB report.
Bert Hofman, the WB's Lead Economist for China, told Xinhua that
establishing both an external and internal balance in the economy
was still a major challenge over the coming years. And China's 11th Five-year Plan?was an
important policy to readjust the economy for future sustained and
healthy development.
He suggested that China should closely monitor environmental
pollution. This was a major challenge not only for East Asia and
Pacific regions but also the world.
(Xinhua News Agency December 14, 2006)