World Bank anticipates 7.7% growth for China in 2004

Asian Economic News, April 26, 2004

WASHINGTON, April 20 Kyodo

China's economy is expected to grow 7.7% in 2004, down from the 9.1% expansion in 2003, and the growth rate is expected to slow to 7.2% in 2005, the World Bank said Tuesday.

''The Chinese authorities are aiming to eliminate overheating by slowing growth to a more sustainable pace of around 7%,'' the World Bank said in its semiannual review of economic conditions in the East Asian and Pacific region.

The Washington-based lending institution said the impact of slower Chinese growth on the regional economy would be limited but cited a possible sharp fall in China's imports as a key risk to the region.

''In a hard-landing scenario where China's imports turn out 10% lower than assumed in the baseline, economies with a high share of exports to China such as (South) Korea and Taiwan could experience somewhat under 1% lower growth, while others like Thailand could experience a little under 0.5% lower growth,'' the World Bank said.

But the economic recovery in Japan and the United States is expected to help cushion the shock to regional exports, it said.

The World Bank said China should shift from its dollar-pegged foreign exchange system to a market-based system after completing a series of financial reforms.

''Given the structure of China's economy and its relationships with other economies, a well-prepared long-term move to some form of flexible exchange rate regime would best serve China's ability to manage its own economy and enhance long-run growth prospects, once its banking sector and foreign exchange market infrastructure have been strengthened,'' it said.

The World Bank estimated economic growth in East Asia as a whole, excluding Japan, at 6.3% for 2004 and at 5.9% for 2005.