The World Bank cut its forecast for China's 2008 economic growth
to 9.6 percent in a report released on Monday, 1.2 percentage
points lower than an earlier estimate of 10.8 percent.
In the newly-released China Quarterly Update, the World
Bank said China's economic growth has begun to inch down from its
record high in 2007, as external demand slowed in the fourth
quarter.
China's economy expanded by 11.4 percent in the whole of 2007,
compared with 11.5 percent in the first three quarters. The annual
growth rate, the highest in 13 years, recorded the fifth year of
double digit growth.
"The slowdown in the global economy should affect China's
exports and investment in the tradable sector," David Dollar,
Country Director for China, said in a statement.
"However, the momentum of domestic demand should remain robust
and a modest global slowdown could contribute to the rebalancing of
the economy," Dollar said.
"If the global slowdown will be more pronounced, China is in a
strong macroeconomic position to stimulate demand by easing fiscal
policy or credit controls," the bank said in the statement.
China needs to introduce macroeconomic policy to address the
challenges of inflation and persistent external surpluses, noted
the Quarterly.
Inflation, which is expected to ease in 2008, is not likely to
decline to low levels with the risks, including from international
food prices and wage cost pressures, it said.
China's consumer price index, the main gauge of inflation,
jumped by the 11-year-high of 4.8 percent in 2007, primarily driven
by huge rises in food prices.
"The inflation concerns call for relatively tight monetary
policy," said Louis Kuijs, Senior Economist and main author of the
Quarterly.
The Quarterly, however, noted the Chinese government
has limited room for interest rate rises amid concerns over more
overseas capital inflows. It added China's monetary policy will
continue to rely on credit controls and liquidity management to
curb huge global surplus.
"Continuing to appreciate the RMB against the U.S. dollar will
help dampen inflation pressures and reduce the current account
surplus," it said.
The bank also suggested the government replace some price
controls with direct subsidies to target needy groups, as the
detrimental effects the administrative measures generate are likely
to outweigh the benefits.
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(Xinhua News Agency February 5, 2008)
