WB raises China growth forecast to 10.4%

Updated: 2007-05-30 15:15

The World Bank raised its forecast for China's economic growth this year to 10.4 percent from an earlier 9.6 percent and urged China to reduce its reliance on exports by boosting domestic consumption.

China's economic growth is still driven by external trade and investment, despite government efforts to get consumers to spend more, the World Bank said in its quarterly outlook Wednesday.

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"Policy would best focus on the financial sector and rebalancing the economy," the bank said. "This requires a shift in production from industry towards services, more reliance on domestic demand and more equally shared and environmentally sustainable growth."

China's economy expanded by 10.7 percent in 2006, its fourth straight year of double-digit growth, and by 11.1 percent in the first quarter of this year. The government has set an 8 percent target for 2007, but it frequently announces a low figure and raises it as the year progresses.

Authorities have raised interest rates four times in the last year -- and twice since mid-March -- in an effort to contain a boom in construction and investment that they worry could ignite inflation or a debt crisis. China has also repeatedly raised bank's reserve ratios, reducing the amount of money available for lending.

The Washington-based bank also expressed concern about the Chinese stock market boom, warning that a sharp fall in prices could hurt confidence in the country's capital markets. But it said the impact on the overall economy should be limited.

Chinese stocks, which have surged 60 percent so far this year, fell Wednesday after the government raised a tax on stock trades to cool the market that some worry has become a bubble.

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