World Bank Boosts China Growth Outlook

The World Bank lent some fresh hope to investors in the U.S. stock market on Thursday with an improved forecast for economic growth in China.

The Washington-based global financial institution raised its growth outlook for the Asian giant to 9.8% for 2008 from 9.4%, citing strong domestic demand and continued dominance in exports.

Wall Street welcomed the news, since overseas economies have helped U.S. multinationals muddle through the economic weakness at home amid the credit and housing crisis.

"The upward revision to our growth forecast largely reflects revised GDP data showing stronger service sector growth," said David Dollar, the bank's country director for China, according to media reports.

The new projection from the World Bank marks a reversal from its earlier revision, which brought its China growth forecast down to 9.4% from 9.6% two months ago on weakening demand for its exports. The shift highlights uncertainties about how the financial and economic turmoil in the U.S. will affect the global economy, and it suggests that China is weathering the situation well so far.

Nevertheless, economic growth in China and elsewhere is slowing after the blistering global boom of the last half-decade, and rising signs of inflation and run-ups in commodities markets are complicating the investment community's efforts to understand what's going on.

The World Bank's current forecast is for growth to slow to 9.2% in 2009, and the Chinese government has set an expansion target for this year of 8%, down from the 11.9% pace it set last year.