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World Bank sees China GDP up 9.5% in 2010

By Qiang Xiaoji (chinadaily.com.cn)
Updated: 2010-03-17 12:01
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The World Bank has raised its economic growth forecast for China from 8.7 percent to 9.5 percent, citing a boost in exports, strong growth in real estate and robust domestic spending.

Building on the momentum shown in the first months of 2010, growth is likely to remain strong in China this year, the World Bank said in a quarterly report Wednesday, adding that the fastest-growing economy should take measures to mitigate risks of a property bubble and avoid strains on local government finances.

"We project 9.5 percent GDP growth for this year," Ardo Hansson, the lead economist for China at the World Bank, said in a statement.

The growth in 2010 would rely less on government stimulus spending, the main force driving the 8.7 percent growth in 2009. China would continue to bolster its economy through government-led investment, but on a much smaller scale, the report said.

Thanks to an impressive recovery early this year and a pickup in the global economy, exports are likely to grow for the whole year and contribute to the economic growth. However, uncertainties remain for later this year.

Another major boost for China's economy this year comes from the real estate sector, which is likely to add significantly more to growth than in 2009 as it begins to rebound.

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Consumer sentiment remains strong for now and domestic consumption will remain robust as Chinese are expected to earn more in a favorable labor market.

The World Bank advised the Chinese government to tighten monetary and other policies and to have a stronger yuan to manage inflation expectations and contain the risk of an asset-price bubble.

Inflation will reach 3.5‐4 percent on average in 2010, largely due to rising food prices, but prices are not likely to continue to increase as rapidly as they did at the end of 2009 because the factors behind food price increases are not likely to persist.

Property prices may well continue to rise significantly this year, particularly in the first half.

"The macroeconomic policy stance will have to be tighter this year than in 2009," Louis Kuijs, senior economist at the bank and main author of the report, said.

It also suggested that China should try to avoid strains on local government debt, but said local finance problems are unlikely to cause systemic stress given China's solid macroeconomic position.

The World Bank predicted a sluggish recovery in 2010-11 for rich countries. Growth in developed countries will be 1.8 percent in 2010, and edge up to 2.3 percent in 2011, while emerging and developing economies are forecast to grow at 5.2 percent in 2010 and 5.8 percent in 2011.