World Bank raises China’s economic growth forecast but calls for deepening reforms
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The World Bank has raised its near-term economic forecast for China while renewing its call for President Xi Jinping to carry out in-depth reforms to address low confidence and structural problems in the world’s second-largest economy.
The multilateral bank said on Thursday it had raised its forecast for China’s GDP growth by 0.4 percentage points to 4.5% next year, reflecting a series of policy easing measures announced by Beijing in the past three months and the strengthening of the economy.
The World Bank also raised its full-year forecast for this year by 0.1 percentage points to 4.9%, slightly lower than the Chinese government’s growth target of about 5% in 2024. The economy grew by 4.8% in the first nine months of this year.
The bank also noted recent pledges by Xi Jinping’s economic planners to improve support for social welfare and consumption, and to implement fiscal and tax reforms. But it said more details were needed to boost confidence among households and businesses.
The World Bank said: “Traditional stimulus measures are insufficient to revive growth.” It once again called on China to carry out deeper reforms in areas such as education, health care, social welfare security, pensions and finance. Hukou Household registration system.
China’s economic growth has slowed this year due to weak domestic demand and severe deflationary pressures, following a three-year slump in the property market that hit household wealth.
Xi Jinping has shifted economic focus to investment in high-tech manufacturing and industry, but there are growing concerns that exports, which help boost economic growth, will face the threat of new tariffs under Donald Trump. will serve as President of the United States again next year.
The World Bank also released a new analysis of economic mobility in China from 2010-21, which shows that more than 500 million people may be at risk of falling out of the middle class within just one generation of emerging from poverty.
The bank praised Beijing as a “tremendous success” in lifting 800 million people out of poverty over the past 40 years, noting that the proportion of low-income people has fallen sharply during this period, from 62.3% to 17%.
But the report also found that 38.2% of China’s 1.4 billion people belong to the “vulnerable middle class” – higher than the prescribed low-income line, but “still at risk of falling below this line.” Low-income is defined as $6.85 or less per day in 2017 purchasing power parity terms.
“Nowhere else in the world is the share of the secure middle-class population growing faster than in China,” the World Bank said. “Yet a significant proportion of the population is not yet economically secure.”
As of the 2021 COVID-19 pandemic, the number of this vulnerable group exceeds the 32.1% of the middle class and 17% of the low-income group considered “safe”.
Bert Hofman, the World Bank’s former country director for China in Beijing and now at the National University of Singapore, wrote earlier this month that China’s economic performance post-COVID-19 has exposed the problems built since the last major fiscal reform. weakness.
However, he noted that following statements by policymakers in the second half of 2024 pointing to improvements in income distribution and social security, there were some “promising signs” that reforms were on the way.
“Fiscal reform is now clearly linked to the Chinese Communist Party’s core goal of ‘high-quality growth,’ and leadership recognizes that reform should create a fiscal system that achieves efficiency, fairness, and stability,” Hoffman wrote in a report. ” Asia Society 2025 Forecast.
“A key question is whether reforms are sufficient to transform fiscal policy into a powerful tool for resource allocation, economic stability and income distribution.”
