China on target to meet 7.5% growth, says World Bank

Growth expected to slow to 7.6% this year and 7.5% next year

Aa Chinese bank staff member counting stacks of 100-yuan notes at a bank in Huaibei, east China’s Anhui province. Photograph: AFP/AFP/Getty Images

Aa Chinese bank staff member counting stacks of 100-yuan notes at a bank in Huaibei, east China’s Anhui province. Photograph: AFP/AFP/Getty Images

Fri, Jun 6, 2014, 22:39

The World Bank believes the rebalancing of the Chinese economy means growth will moderate over the medium term, but that China is able to wheel economic support measures to meet its official target of about 7.5 per cent this year.

Growth is expected to slow to 7.6 per cent in 2014, and 7.5 per cent in 2015, from 7.7 per cent in 2013, according to the World Bank’s China Economic Update released today.

Economic activity, including industrial production, has picked up in recent weeks.

The lender approves of government measures to manage rapid credit growth, especially in the shadow banking system, and gradually run down the local government debt accumulated through off-budget and other quasi-fiscal activities.

No pain, no gain

It also backed reform measures, saying they might hurt in the short term but were worth it.

“The proposed reform measures are structural in nature,” observed Karlis Smits, senior economist and main author of the lender’s regular China Economic Update.

“In the medium term, these policy measures will improve the quality of China’s growth – making it more balanced, inclusive and sustainable – and lay the foundation for sound economic development.”

GDP growth slowed from 7.7 per cent in the final quarter of 2013 to 7.4 per cent in the first quarter of 2014.

“The rebalancing will be uneven, reflecting tensions between structural trends and near-term demand management measures,” Chorching Goh, lead economist for China, said in a statement.

The slowdown in the first quarter reflected a combination of dissipating effects of earlier measures to support growth, a weak external environment, and tighter credit, especially for real estate, the lender said.

Meanwhile, the recent acceleration, likely to continue into the next two quarters, was based on robust consumption, a recovery of foreign demand, and growth supporting measures, including infrastructure investments and tax incentives for SMEs.