World Bank sees pick-up in China’s economy

It will be interesting to see how this Yangtze project and other measures to boost growth fit in with the World Bank’s view on China’s economy.

The World Bank says it believes rebalancing of the Chinese economy means economic growth will moderate over the medium term, but China is able to introduce economic support measures to meet its official target of about 7.5 per cent this year. Something like the Yangtze river project, indeed.

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 earlier this month.

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

Economic activity, including industrial production, has shown signs of a pick-up in recent weeks.

The lender approves of government measures to manage and supervise rapid credit growth, “especially in the shadow banking system, and gradually running down the local government debt that has been accumulated through off-budget and other quasi-fiscal activities.” It is also backing reform measures introduced by the government, saying they might hurt in the short term but were worth toughing it out.

"The proposed reform measures are structural in nature," says Karlis Smits, senior economist and main author of the lender's regular China Economic Update.

“In the medium term,” he adds, “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.”