WB raises 2010 growth forecast

09:54, June 11, 2010      

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The World Bank (WB) Thursday raised its forecast for China's 2010 economic growth by 0.5 percent to 9.5 percent, but lowered its forecasts for 2011 and 2012 to 8.5 and 8.2 percent respectively, indicating China's economy is showing signs of a downward trend.

"East Asia has benefited from close links with China, which led the regional (and global) recovery. However, the earlier strong momentum in regional exports and production is waning, and output gaps are closing rapidly," the WB said in its Global Economic Prospects Summer 2010 report, released Thursday.

According to the report, while the impact of the European debt crisis has so far been contained, prolonged rising sovereign debt could make credit more expensive and curtail investment and growth in developing countries.

Standard Chartered echoed the bank's position. The British bank lowered its 2011 gross domestic product (GDP) forecast for China from 9 to 8 percent and predicted 7.1 percent growth in the first quarter of next year.

The downward trend is due to a decrease in manufacturing, a retreat of government investment and stricter housing control policies, Standard Chartered said.

The official purchasing managers' index, which gauges China's manufacturing sector, slipped 1.8 percentage points to 53.9 percent in May, with most of its sub-indexes seeing a decline, according to figures provided by the China Federation of Logistics &Purchasing.

"The Chineseeconomy has shown a downward trend," Cao Lei, an analyst with Ping An Securities, told the Global Times Thursday.

He attributed the trend mainly to an expected impact in exports to the European Union (EU), not only due to lessened demand in the EU, but also higher labor costs in China.

In the photovoltaic industry, for example, Chinese manufacturers have targeted the EU market, but have suffered from the decreasing value of the euro.

However, Lin Yifu, the WB's chief economist, Thursday said the situation in the EU is sure to impact China, as the EU is one of the country's largest export markets. However, Lin added that the Chinese government will heighten its stimulus measures if external factors warrant it.

Source: Global Times


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