CHINA: The World Bank says China is likely to meet its growth target of 7.5 percent this year, but urges the world's second largest economy to implement fiscal reforms

Record ID: 565489

  • Title: CHINA: The World Bank says China is likely to meet its growth target of 7.5 percent this year, but urges the world's second largest economy to implement fiscal reforms
  • Date: 6th June 2014
  • Summary: BEIJING, CHINA (JUNE 6, 2014) (REUTERS) LEAD ECONOMIST AT WORLD BANK BEIJING OFFICE (SECOND FROM LEFT) CHORCHING GOH SEATED, MAIN AUTHOR OF THE CHINA ECONOMIC UPDATE AND SENIOR ECONOMIST AT WORLD BANK BEIJING OFFICE (SECOND FROM RIGHT) KARLIS SMITS SITTING JOURNALIST (SOUNDBITE) (English) LEAD ECONOMIST AT WORLD BANK BEIJING OFFICE, CHORCHING GOH SAYING: "And this will require implementing first and foremost comprehensive fiscal reform. And once the government has laid a foundation stone of reforming the system of public spending and finance, we feel that they can more easily advise reforms in the factor markets, particularly, markets of land, of labour, and of capital." JOURNALIST (SOUNDBITE) (English) MAIN AUTHOR OF THE CHINA ECONOMIC UPDATE AND SENIOR ECONOMIST AT WORLD BANK BEIJING OFFICE, KARLIS SMITS SAYING: "So there's a danger that once the number is set too high, that kind of direct participation in delivering that growth contributes to these vulnerabilities and imbalances. That's why as you indicated, the signaling, directional, is more important than actually the number itself." NEWS CONFERENCE IN PROGRESS
  • Embargoed: 21st June 2014 13:00
  • Keywords:
  • Location: China
  • Country: China
  • Topics: International Relations,Economy
  • Reuters ID: LVA9XCBWBNCSM4GH2PC8KFJ3RVHS
  • Story Text: China is likely to meet its economic growth target of 7.5 percent this year, the World Bank said on Friday (June 6), but must persevere with fiscal and financial sector reforms to deal with the root cause of its debt problems.
    The World Bank expected China's economy to grow 7.6 percent this year on policy support and a recovery of global demand, while it noted growth could slow to 7.5 percent in 2015.
    Reform-minded leaders have ruled out any large stimulus campaign with the country still nursing the hangover from the 4 trillion yuan ($640 billion) stimulus implemented during the global financial crisis in 2008-09, which piled up local debt.
    The new leadership has shown greater tolerance for slower growth as it attempts to steer the economy towards domestic consumption and away from the traditional engines of exports and investment.
    Still, the World Bank saw downside risks to its 2014 China growth projection, as an abrupt deleveraging of local government debt and a sharp slowdown in the real estate sector could weigh on economic activity.
    The World Bank urged China to speed up fiscal and financial sector reforms to deal with the root cause of its debt problems.

    "And this will require implementing first and foremost comprehensive fiscal reform. And once the government has laid a foundation stone of reforming the system of public spending and finance, we feel that they can more easily advise reforms in the factor markets, particularly, markets of land, of labour, and of capital," said the World Bank Beijing Office's lead economist, Chorching Goh.
    The China Economic Update's main author and a senior economist at the World Bank, Karlis Smits, said there are signs that the government may set a lower growth target for next year to help reduce imbalances in the economy, but did not elaborate.

    "So there's a danger that once the number is set too high, that kind of direct participation in delivering that growth contributes to these vulnerabilities and imbalances. That's why as you indicated, the signaling, directional, is more important than actually the number itself," Smits said.
    The International Monetary Fund said on Thursday (June 5) it expected China to grow by around 7.5 percent this year and then slow to around 7 percent next year.
    The government aims for average annual economic growth of 7 percent under its 12th five-year plan that covers 2011-2015.
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