World Bank puts Chinese growth at +6.5%

The World Bank expects China's GDP to rise by +6.5% this year. Although this is strong growth compared to the rest of the world, it is a downgrade of the Bank's previous projections, and lower than the +8% predicted by Chinese prime minister Wen Jiabao.

The Bank's latest forecast comes as part of its new China Quarterly Update report, released today. It says the lower prediction is due to slower global growth this year, which will impact on China's export-oriented economy. However, it emphasises that +6.5% growth is still a strong performance compared to most other countries.

The Bank's country director for China, David Dollar said, "China is a relative bright spot in an otherwise gloomy global economy. Shifting China's output from exports to domestic needs helps to provide immediate stimulus while laying the foundation for more sustainable growth in the future."

However, the Bank's growth prediction is below the +8% forecast by Mr Wen at the annual opening of the National People's Congress (NPC) - the Chinese Parliament - on March 5. Growth of +8% is seen by some as a key level below which economic expansion must not fall. The fear is that lower growth will result in mass unemployment and civil unrest.

The World Bank's forecast my therefore put pressure on the Chinese Government to increase the CNY 4 trillion (US$ 585 billion) stimulus plan it announced in December. Some US$ 450 billion of this will be invested directly in infrastructure.

Some commentators had speculated Mr Wen would use his state-of-the-nation speech on March 5 to announce more spending, but in the event he did not.