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China must act to prevent hard landing - World Bank

Thursday, May 24, 2012


CHINA: China's economic growth will ease further this year, presenting policy makers in Beijing with the challenge of preventing an excessively abrupt slowdown, the World Bank said in a report Wednesday.

The bank warned slower expansion in China would ripple across Asia and the Pacific, but said the region remained resilient to Europe's economic woes, describing it as a “bright light” in a world mired in low growth.

“China's near-term policy challenge is to sustain growth through a soft landing,” the bank said in its half-yearly review of Asia's developing economies.

“While the prospects for a gradual slowdown remain high, there are concerns that growth could slow too quickly.

However, sufficient policy space exists to respond to downside risks.” The World Bank predicted that China's economy, the world's second-largest, will expand 8.2 percent in 2012, down from 9.2 percent in 2011 and 10.4 percent in 2010.

“A further slowing of demand (in high-income countries) would ripple quickly through East Asia's production and trade networks, where China occupies a central position,” it said.

“Second, the main domestic downside risk arises from the ongoing correction in China's property markets, even though such an adjustment has so far remained gradual and orderly.” Concerns over slowing growth have intensified in China after weak economic data for April was released last week. Growth in industrial production, imports, exports, fixed-asset investment and bank lending all eased in April.

Since then, Beijing has lowered the amount of money that banks are required to hold in their coffers, and economists predict more measures are to come.

The Chinese government has set a growth target of 7.5 percent for 2012, mainly in a bid to keep unemployment under control and avoid social unrest.

The World Bank said China has the means to boost fiscal spending, but should avoid the kind of massive infrastructure spending that characterised its response to the crisis in 2008. AFP
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