World Bank however urges China to strengthen its ‘still fragile private demand’
The World Bank on Wednesday forecast that China’s economy will grow 7.9% in 2021 despite a slowdown amid the COVID-19 pandemic.
In a report titled From Recovery to Rebalancing, the World Bank however said Beijing should avoid any “significant contraction” in fiscal policy next year to keep its post-pandemic economic recovery on track.
“The global environment remains highly uncertain and this calls for an adaptive policy framework. A premature policy exit and excessive tightening could derail the recovery,” said Martin Raiser, World Bank country director for China.
“The withdrawal of fiscal support should proceed gradually, but the focus should shift from traditional infrastructure to more social spending and green investment.”
The report predicted China’s GDP growth to slow to 2% in the current financial year, down from 6.1% but will pick up next fiscal year given that consumer spending and business investment confidence has strengthened besides improving corporate profits, labor market conditions and incomes.
Beijing had announced various stimulus measures, including the issuance of special treasury bonds, lower lending rates, and tax exemptions, to recover the world’s second largest economy from the COVID-19 pandemic.
“China has normalized faster than expected, aided by an effective pandemic-control strategy, strong policy measures, and buoyant exports,” the latest economic update on China said.
The biggest risk to China’s economic outlook remains a resurgence of coronavirus.
‘Consumer, business confidence improved’
The report observed China’s consumer and business confidence have increased, and labor market conditions have improved.
The Chinese government customs data showed that the country’s exports are increasing, hitting record levels last month.
The World Bank also urged China to strengthen its “still fragile private demand” and embrace “market-oriented, structural reforms”.
China was first country to report economic recovery amid the COVID-19 pandemic. The first case of deadly coronavirus was reported in China’s central Wuhan city in December last year and since then it has spread worldwide with over 78 million people catching the virus, including 1.7 million deaths. But China has declared win over the virus and has resumed normal life.