World Bank says China GDP will grow 10.4%
Wednesday, August 16, 2006 – Xinhua – Shanghai Daily
THE World Bank predicted yesterday that China’s economy will grow 10.4 percent this year and 9.3 percent in 2007.
The country’s gross domestic product expanded 10.9 percent in the first half of the year, implying second-quarter growth of 11.3 percent, a pace not seen since 1996. Even so, the economic outlook remains “favorable,” the bank said in a quarterly report released in Beijing.
With production capacity continuing to expand in line with demand, inflation low and the current account in surplus, the economy does not threaten to overheat at present, the bank said.
In the long term, however, the continued investment boom warrants concern and makes more moderate growth desirable, the report said.
The bank projected a mild slowdown in exports and fixed-asset investment for the second half, which would imply a slight fall in GDP growth to below 10 percent, resulting in the 10.4 percent rise for the entire year.
Bert Hofman, the bank’s lead economist for China, stressed that the country’s investment is increasingly driven by corporate profits rather than administrative agendas.
Industries such as transport equipment, machinery and textiles, which were identified by China’s National Development and Reform Commission as having witnessed rapid growth in fixed asset investment, also posted high profit growth.
The only exceptions, Hofman said, were sectors outside core manufacturing where government policies on pricing and other elements have a big influence.
Among the report’s other findings, investment growth tended to be higher in industries dominated by the private sector. State-owned enterprises, in contrast, appear to have displayed a negative relationship with fixed-asset investment growth, the report said.
The bank also attributed fixed-asset investment growth to the behavior of local governments, saying local officials have strong incentives for promoting an increase as their performance is often rated on GDP growth and foreign direct investment. In addition, local governments benefit from land sales associated with investment projects as well as value-added tax revenues on the production of goods.
The World Bank also reported that 6 million urban jobs were created in the first half, 60 percent of the government’s target for the year. The private sector created 5.9 million jobs in the first quarter, far more than the number of jobs shed by state-owned and collective enterprises, 2.6 million.
