BEIJING - The World Bank expects China's economy to grow by 10.4 percent this
year and cool to 9.6 percent in 2007, but has warned that such fast paced growth
was exacerbating structural imbalances.
The 2007 growth figure was higher than the bank's August prediction that
China's economy would grow by 9.3 percent next year, while the bank's growth
prediction for 2006 remained unchanged from its original estimate.
Over the medium and long term,
rebalancing the economy would be China's key economic challenge, while its main
short-term macro challenge would be to address its surging trade surplus, the
latest report said.
The moon over Beijing. The World Bank expects China's economy
to grow by 10.4 percent this year and cool to 9.6 percent in 2007, but has
warned that such fast paced growth was exacerbating structural imbalances.
Beijing needed to shift production from industry to services and rely more on
domestic demand, strive for more even economic development across its population
and environmentally sustainable growth, the report said.
"The lower investment growth that the authorities aim for, which is desirable
for efficiency reasons, could aggravate the external imbalance if achieved
without more consumption growth," Bert Hofman, the bank's lead economist for
China, warned in statement.
China's gross domestic product slowed to 10.4 percent in the third quarter
after registering an 11.3 percent clip in the second trimester.
The slow down was partially attributed to fixed assets investments that grew
by 29.8 percent in the first half of 2006, but slowed to 23.8 percent in the
third quarter, the report said.
"The concerns about high investment growth and the pattern of growth have to
be addressed by structural reforms," Louis Kuijs, the main author of the report
"The underlying causes of high investment can be tackled through better
pricing of energy, resources, land and environmental damage, higher interest
rates (and) limiting retained earnings by better corporate governance."
The government also needed to moderate local governments' incentives to
pursue growth, he said.
Overall, the quarterly report said the prospects of engineering a soft
landing for China's booming economy remained good, while "underlying domestic
economic conditions remain favorable to rapid growth."