China: Economic growth to fall to 9.4 pct in 2009 – World Bank

2 April 2008

Beijing, China, 2 April – Growth of the Chinese economy is expected to slow and fall from 11.4 percent in 2007 to 9.4 percent in 2008, bringing an end to five consecutive years of two-digit growth, the World Bank said Tuesday.

According to the World Bank’s report on East Asia, China’s economic growth in 2009 is also expected to see a slowdown to 9.2 percent, with the fall partially broken by strong internal demand.

The fall in growth, which is a result of lowered exports, is expected to benefit Beijing, which has struggled to cool the economy despite measures to prevent economic overheating, the World Bank said.

The Chinese economy posted two-digit growth in 2007 for the fifth consecutive year, despite a fall in exports, particularly to the European Union and the United States, markets which are contracting due to the crisis of the mortgage system.

However, inflation, rose again in 2007 and showed no sign of falling due to the rise in prices of food, particularly driven by a reduced supply of pork.

The World Bank also warned that “international prices of energy and agricultural products continue to rise, which will have a gradual effect on domestic prices.”

The Chinese government has reiterated the need to stabilise the price of foodstuffs, showing concern about social discontent brought on by the high price of essential products, having even imposed maximum limits on some retail sales prices.

However, the World Bank warned in the same report that the Chinese government’s policy of controlling prices, introduced to fight inflation, which at the begging of 2008 reached a 12-year high, could have the opposite effect.

One of the main problems caused by price freezes is their maintenance at an artificial level, which can discourage production by companies resulting in scarcity of certain goods and a later increase in their price, the Bank said.

China froze the price of foodstuffs, a number of energy products, some basic products and some public services in January, after inflation reached its highest point of the decade at 4.8 percent in 2007. (macauhub)