World Bank predicts China's GDP growth to reach 8.4%

In the latest China Quarterly Update released on November 4, the World Bank says China is on track to meet the target of 8% GDP growth this year and predicts the growth rate will reach 8.4 % in 2009.

The factor that contributes to such good performance is "large fiscal and monetary stimulus has supported a recovery in China's economy," according to the Update.

The World Bank finds that falling exports amidst the global recession have been a major drag on growth. With processing exports particularly hard hit by the outbreak of the crisis, China's overall goods exports initially fell even faster than the imports of its trading partners. Processing trade subsequently recovered rapidly. Nonetheless, total volumes of goods exports have remained weak and were still down 6.7 percent on a year ago in September. Net external trade withdrew 3.6 percentage points from GDP growth in the first 3 quarters.

China's GDP growth rose to 8.9 percent year-on-year in the third quarter on the back of the stimulus. Although most of the stimulus has shown up in infrastructure-oriented government-led investment, some has been consumption-oriented and domestic demand growth has been broad based. Resurgent housing sales have started to feed through to construction activity. Investment in manufacturing is affected by spare capacity, but consumption has held up well.

The World Bank expects the growth impact of the government stimulus is set to decline sharply next year and investment in parts of manufacturing is likely to remain under pressure from spare capacity in China and abroad.

"On the back of a larger than expected monetary stimulus, China is on track to meet the target of 8 percent GDP growth this year," said Ardo Hansson, Lead Economist for China. "We project GDP growth of 8.4 percent. Growth is likely to remain robust in 2010, but the composition will change."

By People's Daily Online