World Bank boosts China growth forecast to 8.4% with conditions

Beijing: The World Bank raised its 2009 growth forecast for China from 7.2 per cent to 8.4 per cent but warned yesterday a sustained recovery will require a shift in the economy to emphasise consumer spending instead of industry and investment.

The strength of China's rebound led the bank to increase its growth forecast for developing East Asia by 1.3 percentage points to 6.7 per cent, though it cautioned the region was struggling and would grow by as little as 1 per cent if China were excluded.

The Washington-based bank said its higher outlook for China reflects the government's stronger-than-expected stimulus. But it said the impact of the stimulus would fall sharply next year and manufacturing industries will be under pressure as excess capacity at home and abroad holds down prices.

Ultimately, the World Bank said China can no longer count on exports and investment to drive growth and needs to encourage its own consumers to spend more.

"We think that now that the government has basically succeeded in dampening the impact of the global crisis, it's a good time to concentrate and focus effort on rebalancing the economy and getting more growth out of the domestic economy," said Louis Kuijs, the bank's chief China economist, at a news conference.

"This calls for more emphasis on consumption and services and less emphasis on investment and industry."

Beijing's 4 trillion yuan (Dh2.1 trillion), two-year stimulus has helped China to rebound.