JOC 5/2/08

China growth seen slowing

The World Bank revised its growth forecast for the Chinese economy in 2008 to 9.6 percent, down from an earlier forecast of 10.8 percent, as a result of the downturn in the global economy.

This is the first time in six years that the Chinese economy has been forecast to grow by less than 10 percent. in 2007, it grew by 11.4 percent, a 13-year-high.

"The slowdown in the global economy should affect China's exports and investment in the tradable sector," said David Dollar, the World Banks director for China, at a press conference held to release the report. "The momentum of domestic demand, however, should remain robust and a modest global slowdown could contribute to rebalancing of the economy."

In 2007, for the first time in seven years, China's domestic consumption outweighed the economic impact of net exports and investments, contributing
4.4 percentage points of the countrys overall 11.4 percent GDP growth.
Investments contributed 4.3 percentage points while net exports provided
2.7 percentage points, according to a report by the National Bureau of Statistics late last week. The economy grew by 11.9 percent during the first half of 2007.

The slowdown of China's economy should not be seen as a bad omen, according to the World Bank report, because the government is in a strong macroeconomic position to stimulate demand by easing fiscal policy and credit controls if and when the United States and global downturn worsens.
Inflation, however, remains a serious challenge for the government, the report added.