World Bank: China's recovery could start this year World Bank says China recovery could start this year, possibly helping the rest of Asia * Joe Mcdonald, AP Business Writer * Tuesday April 7, 2009, 4:53 am EDT
BEIJING (AP) -- China is likely to emerge from its economic slump this year, helping the rest of Asia stabilize and possibly rebound, the World Bank said Tuesday. "A ray of hope may be emerging with signs of China's economy bottoming out by mid-2009," the bank said in a statement. "A recovery in China -- fueled largely by the country's huge economic stimulus package -- is likely to begin this year and take full hold in 2010, potentially contributing to the region's stabilization, and perhaps recovery." China's economy, the world's third-largest, should expand by 6.5 percent this year, though exports will shrink as Western markets contract, the bank said in a report on Asian economies. That's slower than China's 9 percent growth last year, but still the strongest of any major economy in the world. Many Asian economies are already contracting and expected to shrink further in 2009. Beijing is trying to reduce reliance on trade with a 4 trillion yuan ($586 billion) plan to pump money into the economy through higher public works spending in hopes of boosting domestic consumption. "The Chinese authorities have done an incredible amount," said Vikram Nehru, the World Bank's chief East Asia economist, in a video conference from Tokyo. "What we're seeing in China is a willingness to take all the necessary action to make sure the economy continues to grow at a relatively rapid pace." Premier Wen Jiabao, China's top economic official, said last month the government was ready to expand its stimulus if the impact of the global crisis worsens. He said Beijing has "reserved adequate ammunition," though he gave no details. China's central bank said last week that data pointed toward a recovery, though it gave no details or a timeframe. Some private sector economists already were forecasting that China would pull out of its slump by late 2009. They pointed to higher bank lending and demand for steel and power as tenative signs of economic activity. "It's not a question of whether it will get better. It's already getting better," said Frank F.X. Gong, chief China economist for J.P. Morgan. "The question is whether something would happen to disrupt that kind of recovery." Gong said he expects China to grow 7.2 percent this year. But he said potential problems include public expectations of a fall in prices, which can discourage spending and investment, a fall in demand for housing or further declines in trade. "We are not sure China's exports have seen the bottom yet, so that sector will still be tough," Gong said. "If the U.S. economy fails to recover in the second half, China's export slump could last longer." The Washington-based World Bank said pressure for Chinese prices to rise is still low, leaving room for the government to cut interest rates or take other steps to fuel growth. China's growth has plunged as global demand weakened, with exports falling 25.7 percent in February from a year earlier. Private sector analysts are forecasting growth as low as 5 percent this year, down from 2007's 13 percent -- though still the fastest of any major country. The government's official target is 8 percent. Taimur Baig, Deutsche Bank's director of Asia Economics, cautioned that Beijing might have to launch a new stimulus package to maintain growth. "We believe that the stimulus package will have a very short-term impact on China's growth trajectory and by the middle of this year we'll actually see a loss of momentum yet again," Baig said in Singapore. "We expect the Chinese authorities to counteract this incipient slowdown with another stimulus package by the middle of this year." China is a key customer for other Asian nations that supply raw materials and components for manufacturing and other industries, making its economic health a factor in their ability to emerge from the regional slump. A government-authorized business group reported last week that manufacturing expanded slightly in March following a months-long decline that has thrown at least 20 million people out of work. The World Bank cautioned that Chinese industry will have large unused capacity, possibly leading to weaker investment, slower job growth and downward pressure on prices, which can cut into company profits and investment. "China cannot escape the external weakness," it said, and government spending alone cannot offset losses in trade.
