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China’s growth predicted to slow after rapid start to 2010

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China’s growth predicted to slow after rapid start to 2010

18th June 2010

By: Creamer Media Reporter

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China's growth would likely ease somewhat during this year, but the country's growth remains "robust", the World Bank estimates.


In its latest ‘China Quarterly Update' released on Friday, the bank noted that a partial normalisation of the macropolicy stance and new property market measures, would lead to some easing in the Asian nation's growth, following a rapid start to the year.

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China's gross domestic product was, nevertheless, expected to expand by 9,5% this year and by 8,5% in 2011.


"Growth should be less investment driven this year and benefit from more favourable external trade, while consumption is likely to remain supported by a strong labour market," said World Bank lead economist for China Ardo Hansson.

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The bank highlighted that the country's export volumes had recovered rapidly since early last year. Export volumes in the first five months of this year were up 10% on that of the past two years.


However, China's trade surplus had declined further owing to surging import volumes and declining terms of trade, stated the World Bank. Its trade surplus for the first five months of this year declined by more than 50% on that of the first five months of 2008.


Its terms of trade had declined between early 2009 and April this year and remained below where they were two years before.


The World Bank noted that almost one-third of the decline in the trade balance over the past two years were as a result of worsened terms of trade.


Meanwhile, World Bank senior economist Louis Kuijs noted that the country should further normalise its overall macroeconomic stance, given the robust growth prospects.


"Substantial uncertainty around a favourable outlook calls for policy flexibility rather than continued stimulus by default," he added.


Further, Kuijs suggested that interest rates remained low and that the country could "usefully" let interest rates play a larger role in its monetary policy.


The World Bank, meanwhile, welcomed the government's intention to strengthen the role of private enterprises in the economy and to remove the barriers these enterprises faced.


However, it added that it would be useful to clarify the role that the government envisaged State-owned enterprises playing in China's economy.

 

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