World Bank forecasts growth for region, but structural reforms key

08:19, April 08, 2010      

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By Tu Lei

Developing countries in the East Asia and Pacific region, including China, can grow rapidly in the next decade even in a weakened world economy, but only if they implement structural reforms with renewed vigor, said a report released by the World Bank Wednesday.

The report is the World Bank's twice-yearly assessment of the economies of the region, and estimates real GDP growth in East Asia will reach 8.7 percent in 2010 after slowing from 8.5 percent in 2008 to 7.0 percent in 2009.

For China, structural reform means rebalancing the economy, including enabling a larger role for the service sector and private consumption and moving away from investment-heavy export-led growth, as well as encouraging governmental sustainability, the report said.

However, experts said it is hard to stimulate private consumption, although the government has realized the importance of doing so.

Although the wealthy spend around 50 percent of their incomes, the poor are willing to spend 100 percent or more, despite even though they have much weaker buying power, said Tian Yun, a researcher with the China Society of Macroeconomics (CSM).

Chinese still have financial pressures related to healthcare, education and housing, and the sluggish stock market has also reined in consumption, said Zhang Chunzi, general manager of the planning department of China Citic Bank.

"Last year, the growth of consumption of cars reached 70 percent, but such big growth can only last for a year and a half, and the market still takes time to build wealth," Zhang was quoted as saying by the Financial News in March.

Moreover, officials from the World Bank also said it is still too early for countries to withdraw their stimulus policies, as private investment has not been a growth engine yet.

"Without private investment, the economy will not have a recovery," said Ardo Hansson, lead economist from the World Bank for China.

Tian from CSM said private investment has been the economic growth engine in China, but there are serious limitations for private companies looking to compete with SOEs.

Source: Global Times


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