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China's growth robust, may slow down: World Bank

world Updated: Jun 18, 2010 13:35 IST

DPA
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China's economy "continued to grow robustly" in the first half of this year but has shown signs of "some softening" that could slow growth slightly in 2011, the World Bank said on Friday.

"We project GDP (gross domestic product) growth of 9.5 per cent for 2010 and 8.5 per cent for 2011, with risks both ways," Ardo Hansson, World Bank's lead economist for China, said at the launch of the bank's quarterly report on China.

"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," Hansson said.

The report said the World Bank expected China's huge trade surplus to "decline somewhat further" in the rest of this year.

It said the Chinese government appeared capable of containing inflation, while a "wage-price spiral is not likely".

Strong property investment had helped to reduce reliance on the government's two-year, four-trillion-yuan ($580 billion) economic stimulus programme, it said.

But Louis Kuijs, the bank's Beijing-based senior economist, warned that "substantial uncertainty around a favourable outlook calls for policy flexibility rather than continued stimulus by default".

Kuijs welcomed the government's efforts to control lending by local government investment platforms but noted that bank interest rates remained low.

"China could usefully let interest rates play a larger role in monetary policy," the report said.

It said China still needed long-term reforms in its fiscal policy, social protection and labour market management, which were "important both to foster productivity growth and improve social outcomes".

China said its economy grew 8.7 per cent in 2009 and showed signs of recovery from the global slowdown despite a 16 per cent fall in export values.

Analysts said they expected China to overtake Japan this year as the world's second-largest economy after the US.