China's Economy Fuels East Asian Growth: WB

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Last updated at: (Beijing Time) Friday, April 04, 2003

China's Economy Fuels East Asian Growth: WB

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China's vigorous economy boosted East Asian economic growth from 5.5 percent in 2001 to 6.7 in 2002, despite relative stagnation in Japan and volatile US demand, according to a World Bank report released Thursday.

According to the report, entitled "Foreign Investment, Remittances Outpace Debt as Sources of Financing for Developing Countries," the economic growth rate of developing countries reached 3.1 percent in 2002, 0.3 percentage points higher than that of 2001.

However, according to the report, due to the sluggish recovery of developed economies and uncertainty in the financial and political sectors of some developing markets, world trade climbed by only 3 percent and the prices of non-oil commodities rose by 5.1 percent in 2002.

"In the short-term, the next six to eight months, much will depend on factors that are beyond the control of policy-makers in developing countries," said Uri Dadush, director of the Development Prospects Group of the World Bank.

However, he said, over the medium-term, "the improvements that developing countries make in their policy frameworks and investment climates can be a powerful force for higher growth and more rapid poverty reduction."

The World Bank predicted in the report that the Gross Domestic Product (GDP) of developed countries would increase from 1.4 percent in 2002 to 1.9 percent in 2003 and 2.9 percent in 2004, but slow down in 2005 to 2.6 percent.

Disruptions caused by the military actions in Iraq, including atemporary rise in oil prices, are built into the forecasts, but nosevere, lasting dislocations are assumed, the World Bank report said.

According to the report, the GDP growth of the world will reach2.3 percent in 2003 and 3.2 percent in 2004, while that of the East Asia and Pacific region will climb to 6.4 percent in 2003 and6.6 percent in 2005.

In East Asia, the report said, the new round of market liberalization, strong economic growth and optimism following China's accession to the World Trade Organization contributed to buoyant Foreign Direct Investment (FDI).

FDI inflows to the East Asia and the Pacific region rose to 57 billion US dollars in 2002, the report said, up from 48.9 billion in 2001, as a result of the continuing rise in FDI flows to China.

China, the report said, became the largest FDI recipient in 2002, surpassing the United States for the first time, by attracting a record high 52.7 billion US dollars, accounting for 37 percent of the developing countries' total in 2002.

Net FDI inflows to the region are expected to increase by an average of 10 percent per year during the period from 2003 to 2005,the report said.

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