The World Bank just recently once again raised its forecast for growth in China. In March its prediction for China's 2009 gross domestic product was 6.5%. It is now up to 7.2%. The new estimates are important for two reasons: investors in emerging markets are waiting to see if the upside economic trends continue. In addition, the hope is that a bustling Chinese economy will help pull other countries, including the U.S., out of their recessions.
"Growth in China should remain respectable this year and next, although it is too early to say a robust sustained recovery is on the way," said World Bank lead China economist Ardo Hansson.
The World Bank concedes that much of China's growth will be the result of a major stimulus package the government implemented some months ago. But real growth through investment in industry and the markets are still not a major force. That has some investment strategists concerned. "There are limits to how much and how long China's growth can diverge from global growth based on government influenced spending," Hansson said.
Investors are once again eyeing China as a great investment opportunity but are thinking that timing is crucial. The World Bank cautioned that China's GDP growth won't return to the rapid, double-digit pace it enjoyed before the financial crisis, or even the "high single digits," until the world economy recovers as a whole.
Here are some key trends from the report:
- China's economy has continued to feel the brunt of the global crisis.
- However, very expansionary fiscal and monetary policies have kept the economy growing respectably.
- Global growth prospects remain subdued even as signs of stabilization have emerged.
- Growth in China should remain respectable this year and next, although it is too early to say a robust sustained recovery is on the way.
