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.
"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
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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