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China to bolster E Asia economy: UN report
Updated: 2009-05-28 14:16

UNITED NATIONS -- The recovery of the domestic demand in China is expected to enable the East Asia region to reach a relatively robust growth rate of 5.6 percent in 2010, according to a mid-year United Nations report released here on Wednesday.

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China stresses domestic demand in stimulating growth

"In the baseline forecast, regional economic growth (in East Asia) is expected to return to a relatively robust 5.6 percent in 2010, led by a recovery of domestic demand in China fueled by the massive fiscal stimulus package the country is implementing," said the World Economic Situation and Prospects 2009 (WESP) report.

China has earmarked $586 billion for the fiscal stimulus package.

"The region's growth recovery would further depend on recovery in developed economies," said the report, which was produced by the United Nations Department of Economic and Social Affairs (DESA) .

"Despite seemingly strong macroeconomic fundamentals, East Asia has suffered a severe economic downturn since September 2008," the report said. "GDP (gross domestic product) growth in the region is expected to slow from an average of 6.1 percent in 2008 to 3.0 percent in 2009."

"Over the past six months, collapsing final demand in developed economies, combined with major reversals of capital flows, have led to sharp contractions of exports, industrial production and investment spending in most countries of the region," the report said.

A portion of China's recovery will further depend on recovery in developed economies, said the report.

In part, China's future growth rate depends on the United States, which is expected to recover to a "meager rate of 1.0 percent in 2010," according to the report. China currently holds $1. 7 trillion  in foreign-exchange reserves and is looking for ways to diversify its investments.

In the meantime, China is expected to register much slower growth in 2009 than in recent years, due, in part, from a decline in inflationary rates and, subsequently, a drop in commodity prices. As a result, China is expected to experience higher rates of unemployment, said the report.

"With output plummeting, the number of layoffs has increased markedly in the region," said the report. "So far, official labor market statistics do not reveal the full magnitude of the crisis, with most of the surge in unemployment likely to come in 2009."