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World Bank Optimistic on the Sustainability of China’s Economy

Nov. 3 – The World Bank released a quarterly report on China on Wednesday, analyzing different aspects of China’s economic growth and policies, as well as forecasting future trends and providing policy prescriptions to advance economic sustainability.

The report observes that economic growth has somewhat leveled off to a rate of 9.6 percent year-on-year in the third quarter of this year, with shifts in the dynamics of the economy.

Domestic consumption and investments have slowed slightly, and China continues to lead in exports, but lags in imports, increasing the existing trade surplus.

As growth has stabilized and will continue to do so in 2011, the report states, there is an even more pressing need for the Chinese government to push for economic reform while the window of opportunity is still open. The World Bank suggests that by injecting flexibility into its macroeconomic policies, China will be better prepared to respond to changes in the economy and better protect its growth.

In the report, the Washington-based bank forecast that China’s economic growth will slow slightly to a more modest, but still strong, 8.7 percent, slightly up from its previous estimate of 8.5 percent.

The report also stresses that the government must loosen restrictions on the private sector, in order to temper the private investment environment and encourage investment, and thereby reach the goals recently set forth in China’s 12th Five-Year Plan. These actions include reducing unnecessary and burdensome bureaucratic processes, as well as encouraging fair competition between state and private industries.

Another policy prescription offered by the World Bank addresses China’s environmental issues, and the need for the government to implement regulations on environmental standards in order to promote sustainable economic growth. Suggested reforms include innovation in green energy technology, as well as market reforms, which would encourage the development of the green energy sector.

The quarterly update remains optimistic in the sustainability of China’s economy; however, it also emphasizes the risks that China faces if it fails to firmly implement economic reforms and improve the quality of economic growth.

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One Response to World Bank Optimistic on the Sustainability of China’s Economy

  1. The_Observer says:

    Seems like sensible advice from the World Bank. Let’s hope the Chinese authorities take on board their suggestions and more importantly make sure they acted on by the provincial and local authorities.

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