Global Financial Crisis to Hit China's Economic Growth

2008-11-28

The World Bank is predicting China's economic growth rate for 2009 will slow to 7.5 percent. This number is nearly two points lower than China's expected growth rate for this year, of 9.4 percent.

 
World Bank economist Louis Kuijs says China's downturn will worsen in the first half of next year largely because of weakening export demand.

Although there is no way to make China fully immune, Kuijs says the Chinese government can take steps to help minimize the effects of the global crisis on the country.

"We are seeing a weak external sector, we're seeing a rather weak private sector demand in general, but we are seeing a government that steps in and that is trying to do everything it can to keep growth at a decent rate, and has the financial means and, we would say, the administrative capacity to make that happen," he said.

China recently announced a multibillion dollar stimulus plan, which calls for injecting money into the economy through spending on construction, tax cuts, and aid to the poor and farmers.

World Bank China representative David Dollar applauded the package, saying more spending on social programs and aid to the poor in the countryside should help boost growth.

In a separate issue, Dollar said the lending agency and the Chinese government are in initial talks about providing financing for loans to other developing countries.

"The World Bank group is talking to China about ways in which it could contribute some additional financing of the World Bank group that will help developing countries," he said.

The World Bank forecast is in line with projections by investment banks, which have cut their China outlook several times, as global conditions worsen.