China leading world in economic recovery

China is on track to be the first major economy to emerge from the global slump, a World Bank report released on Wednesday suggested.

China’s growth rate this year is likely to hit 8.4 percent, the Washington-based bank predicted. Officials warned, though, that it would take more than Beijing’s massive stimulus plan to sustain the recovery next year.

China’s $586 billion spending boost, injected soon after the financial crisis broke a year ago, has fueled road-building and other public works, and funded a spending spree by banks.

That has jacked up economic growth, and created jobs for more than half the people thrown out of work when exports collapsed last year and factories laid off around 30 million workers, according to the government.

But the growth impact of the stimulus spending will wear off next year, said the World Bank’s chief China economist, Louis Kuijs.

“It is a good time to concentrate … on rebalancing the economy and getting more growth,” he argued. “This calls for more emphasis on consumption and services and less emphasis on investment and industry.”

Government officials have said much the same thing recently, and the bank’s report points to increased health, education, and social safety-net spending as “useful steps” toward encouraging consumers to save less for a rainy day and to spend more now.

Stronger domestic demand has lifted import volumes, the report said, while slowing global demand has stifled exports. The current account surplus – a measure of trade in goods and services – could fall to 5.5 percent of GDP this year, down nearly half from last year.

China’s continued growth in the face of the global slowdown has been remarkable: Its projected GDP growth this year will offset three-quarters of the decline in the GDPs of the US, the Eurozone, and Japan, the World bank forecast.

That growth has also helped countries in East Asia and the Pacific, which have been able to continue selling their goods to Chinese factories and consumers, the report found. Overall, however, the region’s outlook is “less rosy” than China’s, the bank says, and “the rebound has yet to become a recovery.”

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Read more about China’s efforts to boost domestic consumption here.