World Bank Ups China '09 Growth Forecast

By Joe McDonald

BEIJING-- The World Bank raised its 2009 economic growth forecast for China to 7.2% from 6.5% because of its stimulus-driven investment boom but cautioned Thursday it was too soon to say a sustained recovery was on the way.

The stimulus impact is bigger than expected and will "strongly support growth," said Ardo Hansson, the bank's lead China economist. The 4 trillion yuan ($586 billion) plan is aimed at shielding China from the global slump by pumping money into the economy through spending on building airports and other public works.

"Growth in China should remain respectable this year and next, although it is too early to say a robust recovery is on the way," Hansson said at a news conference.

Trade and private investment will remain weak, consumption will slow and a full-fledged recovery has to wait for the global economy and export demand to rebound, the Washington-based lender said in a quarterly report.

China's economy grew 6.1% in the first quarter from the same time last year, the strongest rate of any major country but below the government's 2009 target of 8% and far from 2007's explosive 13%.

Thursday was the first time the bank has raised its outlook for China since November, when it slashed its 2009 forecast from 9.2% to 7.5%. The bank cut that again in March to 6.5%. The bank said the growth rate should rise slightly in 2010 to 7.7%.

Hansson expressed surprise at Beijing's "Buy China" order, reported this week by state media, for stimulus projects to use domestically made goods. Foreign business groups appealed to the government Wednesday to avoid protectionism, warning it might hurt Chinese and foreign companies at a time when cooperation is needed to revive global growth.