World Bank lowers China forecast
This is definitely a bad news for those hopefuls who were relying on the Chinese momentum of growth for the recovery of the world from the recession.The multiple level forecasting is just one more step in the direction of gloomy picture projection.The latest projection of World Bank says that the Chinese economy will grow at the rate of 6.5% not at the rate of 7.5% as projected earlier.The reasons are many but the prime one is slowing export demand.
How Chinese economy will perform, it is beyond the calculation, but it for sure that the projection might be wrong, and growth rate might head further south.There no sign of recovery in demand in the west even after the bailout package in various countries of the world.In this situation it is almost for sure that the Dragon will slow down for the time being.
The World Bank has cut its prediction for China's economic growth in 2009 to 6.5% from 7.5%, saying it could not "escape the impact of global weakness".
Falling demand for Chinese goods abroad - which the bank said could cost up to 25 million jobs - is the main reason for the projected slowdown.
The growth forecast is well below the minimum of 8% that many analysts argue is required to keep China stable.
Beijing has spoken of a threat of social unrest if the economy stalls.
China is heavily dependent on the global economy which buys its imports. But as recession grips the US and Europe - among its largest customers - demand has fallen, resulting in factories closing and millions of people losing their jobs.
"As the global crisis has intensified, China's exports have been hit badly, affecting market-based investment and sentiment, notably in the manufacturing sector," the World Bank said.
The bank also warned Beijing that it would be thwarting its own medium-term goals if it tried to offset the slowdown by further boosting investment.
It said China's fundamentals remained strong, but warned against focusing too much on capital-intensive projects.
"The fundamentals for China are strong enough to ride out this storm, and it may be just as appropriate to shift the focus as much as possible to the medium and long-term challenges instead of a very narrow focus on short-term growth objectives," said Louis Kuijs, the senior economist in the bank's Beijing office.
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Negros Oriental, Philippines