THE WORLD Bank confirmed some of the more pessimistic forecasts for China's economic growth when it said it expected 9.4 per cent growth this year and 7.5 per cent next year on the back of weaker housing demand and softer private investment and consumption as well as the global downturn.
China responded with its biggest interest rate cut in 11 years to spur private borrowing and give backup to a multi-billion-dollar stimulus package to boost slowing economic growth.
The 1.08 percentage-point rate cut - the fourth cut in three months - reflects the government's urgency about raising private consumption and investment to supplement state spending on the stimulus package.
Communist leaders are worried about rising job losses - especially in export industries hit by weak global demand - and possible unrest.
So far China has been insulated from a major impact because its banks are healthy and exports strong. But conditions are expected to worsen as export demand weakens and growth in real estate and other domestic industries slows.
In its latest China Quarterly Update, the World Bank said China's economy will likely grow 9.4 per cent this year, slower than the 11.9 per cent of 2007 and its earlier projection of 9.8 per cent.
The cut in 2009's forecast to 7.5 per cent was from an earlier projection of 9.2 per cent.
"We're seeing a government that steps in, that is trying to do everything it can to keep growth at a decent rate, and has the financial means and the administrative capacity to make that happen," said World Bank senior economist Louis Kuijs.
However, the World Bank said there might be limits to what the government can do and urged China to keep trying to rebalance its economy.
The bank also said inflation, which has dogged the Chinese economy, was no longer a major issue for the immediate future.
The global downturn will likely slow China's real export growth, which eventually will lead to a shrinking of the real trade surplus, trimming economic growth "for the first time in many years" in 2009, said the bank.
