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World Bank expects Chinese economic slowdown
Beijing (AFP) June 19, 2008 The World Bank said Thursday it expected China's economic growth to fall to single digits in 2008 for the first time in six years, while inflation would be higher than previously forecast. "China's economic growth has moderated to a more sustainable pace," the bank said in its quarterly report on China, adding it expected 9.8 percent expansion this year, down from 11.9 percent in 2007. The moderation was in line with weaker global economic performance, but China's growth will still supported by strong international competitiveness and a robust domestic economy, it said. Meanwhile, the forecast for inflation this year was raised to 7.0 percent from 4.6 percent less than three months ago, amid spiralling commodity prices. China's consumer price index rose 4.8 percent in 2007, fuelled mainly by food prices. But inflation was at 7.7 percent last month, lingering at close to 12-year highs. "Inflation is expected to come down only gradually. There are significant risks attached to inflation projections, particularly from higher international commodity and energy prices," the report said. The bank predicted inflation of 5.3 percent next year. The report argued that there was no need for policy makers to ease relatively tight monetary policy, given China had to cut its still large trade surplus and contain inflation expectations. The World Bank urged the country to continue to strengthen its currency, focusing on its value against not only the US dollar but also the currencies of other major trading partners. "China's largest trading partner now is the eurozone. So we also suggest it makes sense to look at the trade-weighted exchange rate," David Dollar, the bank's country director for China, told reporters. He said so far there had been only very modest appreciation in China's trade-weighted exchange rate -- about three percent annually in recent years. The bank also called on China to gradually liberalise its state-controlled oil prices towards market rates to change people's consumption pattern and improve energy efficiency. "Fuel prices in China don't reflect the scarcity of energy and that inhibit the rebalancing of the economy," said the bank's senior economist Louis Kuijs. "It inhibits efficiency improvements, it inhibits the energy security that the China government is striving for." Community Email This Article Comment On This Article Share This Article With Planet Earth
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