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03/29/2024 09:44:02 am

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World Bank Cuts China Growth Forecast, Explains Economic Slowdown Not A Weak Point

Chinese Premier Li Keqiang

(Photo : Reuters/Kim Kyung-Hoon) Chinese Premier Li Keqiang gestures as he speaks during a session of the World Economic Forum (WEF) in the Chinese port city of Tianjin September 9, 2014.

The World Bank forecasts Monday a slight decrease in China's overall economic growth by 7.4 percent (2014), 7.2 percent (2015), and 7.1 percent (2016) as the country is currently undergoing financial and structural reforms. The organization, however, emphasized that the decline in figures does not necessarily mean China's pitfall.

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The World Bank's East Asia Pacific Region chief economist Sudhir Shetty explains that "measures to contain local government debt, curb shadow banking and tackle excess capacity, high energy demand and high pollution" are more likely to "reduce investment and manufacturing output."

Shetty added that as higher taxes are implemented, capital flows and real property markets will be significantly affected, especially countries with high debt deficit.

However, he prefers to call the situation a "cautious optimism" giving enough attention to "unchartered waters" or unaddressed areas of the economy vital to growth.

Louis Kuijs, Greater China chief economist at RBS, said that Beijing is not likely to meet its 7.5 percent target growth this year, but clarified that the government is "okay" with it as long as the "labor market is holding up."

The World Bank advises that creating counter measures like to address loose monetary policy and enhancing exports can help China and other neighboring countries to counter risks and vulnerabilities.

Specifically, infrastructure investment, logistics, and liberalization of foreign direct investments are key reforms that Beijing needs to concentrate to balance growth in the next three years.

Meanwhile, GDP growth projections for the rest of Developing East Asian region plummet to 6.9 percent (2014, 2015) and 6.8 percent (2016) from 7.2 percent last year. Despite the decline in numbers, experts say that the Developing East Asia Pacific countries are considered the fastest growing nations in the world.

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