World Bank lowers China growth forecast to 9.6 percent

The World Bank has cut its forecast for China's 2008 GDP growth to 9.6 percent as a slowdown in the global economy is expected to impact China's export growth, Bloomberg writes. The revised figure is down 1.2 percentage points from the November estimate of 10.8 percent.

However, according to David Dollar, the World Bank's country director for China, domestic demand is expected to remain strong, which will help offset any slowdown in export growth.

Meanwhile the International Monetary Fund (IMF) has held on to its 10 percent growth forecast for China. It also expects the world economy to ease down to 4.1 percent this year from 4.9 percent in 2007.

China will not likely be greatly affected by a global slowdown, as it could boost government spending and ease credit controls in order to further stimulate domestic demand, the World Bank said. The rise in food prices is also expected to taper off later this year.

China's economic data could be affected by the recent bad weather, which calls for the Chinese government to remain flexible and alert, World Bank economist Louis Kuijs says, adding that the economic effects of the snowstorms, including rising food prices and a decline in industrial output will only be temporary. Zhu Hongren, deputy head of the National Development and Reform Commission, echoes this opinion, saying the impact of the weather on the national economy will be limited.

China's inflation raised concern in November when it rose to an 11-year high of 6.9 percent, but then dropped to a more moderate 6.5 percent in December.

According to Kuijs, there was no indication that rising food prices were translating into general inflation in China, nor that excess demand was fueling price gains, Forbes writes.

However, high inflation in China would spell higher interest rates and call for a relatively tight monetary policy.

In the second half of last year, China's import growth accelerated as exports growth declined. This, Kuijs says, may lead to a slowdown in the rise in the trade surplus.

In 2007, China's economy expanded by 11.4 percent, registering its fifth consecutive year of double-digit growth.

The World Bank's revised forecast for China's economic growth was published Monday in the China Quarterly Update.