World Bank raises its forecast for China 2013

THE World Bank has raised its forecast for China's 2013 economic growth to 8.4 percent from a previous 8.1 percent, citing more fiscal stimulus and faster implementation of large investment projects.

"China's economy has been slowed by weak exports and the government's efforts to cool down the overheating housing sector, but the recovery has set in the final months of this year," the bank said yesterday in its East Asia and Pacific Economic Update.

It said the challenge in the short term was to sustain growth through a soft landing, with the longer-term challenge to steer the economy toward a more sustainable path.

"The ongoing slowdown is partly welcome to the extent that it reflects a deceleration in growth from above-potential levels," the report said.

China's gross domestic product grew 7.4 percent in the third quarter, the slowest pace in more than three years.

But there are already signs of a growth revival in the world's second-largest economy, including the improved performance of industrial production, fixed-asset investment and retail sales since September.

At the annual Central Economic Work Conference held recently in Beijing, China's top leadership pledged to continue a proactive fiscal policy and a prudent monetary policy to sustain economic growth, bolstered primarily by domestic demand.

The World Bank report said China's policy response would need to be crafted with longer-term effects and objectives in mind.

"Relative to previous episodes, fiscal stimulus would ideally be less credit-fueled, less local government-funded, and less infrastructure-oriented," the report said.

It suggested fiscal measures to support consumption, such as targeted tax cuts and social welfare spending.

"Reserve requirements could be tweaked further to ease the availability of credit, with policy rate action best reserved for downside scenarios given already accommodative real rates," the report said.

The bank projected China's economic growth to be 7.9 percent this year.

The economies of the East Asia and Pacific region remained resilient despite the lackluster global economy, the report said.

It forecast the region would grow at 7.5 percent this year, and 7.9 percent in 2013.

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