"China's economy, its role in the world economy and its external surplus are now substantially larger than five years ago," the World Bank said on November 3, 2010 in its latest China Quarterly Update, a regular assessment of China’s economy.
It added that although China's rapid growth was easing to a manageable pace, the country had to reduce its dependence on exports and continue to promote domestic consumption.
GDP Growth
According to the World Bank, GDP growth declined from 10.6 per cent in the first half of 2010 to a "still surprisingly strong" 9.6 per cent (year on year) in the third quarter.
"The domestic economy cooled as the stimulus impact is fading out and the monetary stance is being normalized. Growth of investment and urban consumption has decelerated, and so has that of imports. Meanwhile, with exports strong, net external trade has contributed significantly to (year on year) growth and the external surplus is rising again," the Bank noted.
"Coming from this very strong growth that we have seen recently, China should be able to ease gently into a more sustainable rate of growth in 2011 and the medium term," Louis Kuijs, Senior Economist and main author of the Update, said at a news conference reported by the French news agency AFP .
Inflation Above Government Target
Inflation that rose to 3.6 per cent in September 2010, much higher than the 3 per cent government target, should level off but might stay as high as 3.3 per cent next year, the Bank said.
"Pushed up by higher food prices, inflation may stay above the 3 per cent target for a while. It is unlikely to escalate as core inflation remains in check. However, commodity prices may rise further while sustained high wage growth is unlikely but cannot be ruled out," the report warned.
But Kuijs said the economy could easily accommodate increases of three to five per cent.
Reduce Reliance on Exports
Beijing needs to boost wages and consumer spending and promote the growth of private and service businesses to reduce reliance on exports and energy-intensive heavy industry, the World Bank said.
"The need to rebalance to more domestic demand-led, service sector-oriented growth seems stronger now than five years ago," said Kuijs in remarks cited by the Associated Press . "Internationally the environment is less favourable than it was."
Overseas Investments Up, Unemployment Too
Meanwhile, a senior Chinese official announced that investments overseas by Chinese firms were up 10.4 per cent year on year in the first nine months of 2010, the state-run Chinese news agency Xinhua reported on November 2 2010.
Chinese companies invested 36.3 billion U.S. dollars overseas in the first three quarters of 2010, excluding investments in financial sectors, as other companies, hit by the global downturn, reduced overseas investment, Zhang Xiaoqiang, vice-chairman of the National Development and Reform Commission, China's top economic planning agency, said at the opening of an overseas investment fair in Beijing.
By the end of 2009, more than 12,000 Chinese firms had set up 13,000 overseas enterprises in 170 countries and regions, he said.
Reuters news agency noted that with more than one billion workers in China, "the world's most populous nation is facing a huge unemployment problem with reports suggesting that around 22 per cent of China's labour force is without jobs."
"Need To Bridge Rich-Poor Gap"
China's new five-year plan for 2011-2015 had to bridge the gap between rich and poor and develop the rural economy, said Sun Lijian, a professor at Shanghai's Fudan University, in a commentary in the state-run English-language China Daily newspaper on November 2 2010.
Although China had achieved rapid economic development in the last 30 years through trade and investment, using overseas markets and its own low-cost labour resources, "the global financial crisis induced by the United States means that sustainable growth requires a new model," Sun added.
China still faces huge difficulties in its bid to cultivate much-needed domestic demand, he went on.
"The main challenge is whether or not China can ensure steady income growth for its large population, especially for those inhabiting the vast rural and underdeveloped inland regions…
"Another challenge that will possibly influence the growth of domestic demand is whether the country can take effective measures to increase people's willingness to consume and ease their concerns over spending."
The third challenge, he said, was whether China could effectively reduce the widening gap between rich and poor.
"The establishment of a sound income-redistribution system through taxation is essential to maintain economic growth and ensure social harmony as long as measures are taken to prevent capital outflow," Sun argued.
Another state-run Chinese paper, the Global Times, which targets an English-language international readership, said on November 3 2010 that food prices were increasing sharply, and consumer complaints about a new round of price increases were growing.
China's Consumer Price Index (CPI) rose 3.6 per cent to a 23-month high in September 2010 and was expected to have edged higher in October 2010.
"Debate is rife over how fast the current level of inflation is growing and what implications it will have on the world's second-largest economy," the paper said.
Peter Feuilherade - I took voluntary early retirement from the BBC in 2010, and I'm now a freelance writer. I had worked there as a reporter and news editor ...
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