World Bank lifts China growth forecast but calls for deeper reforms

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The World Bank raised its near-term economic forecast for China as President Xi Jinping called for deep reforms to tackle lagging confidence and structural problems in the world’s second-largest economy.

The multilateral lender said Thursday it had revised its forecast ChinaIts GDP growth is expected to rise 0.4 percentage points to 4.5 percent next year, reflecting the strength of the country’s exports as well as policy-easing measures announced by Beijing over the past three months.

The World Bank also raised its full-year forecast for this year by 0.1 percentage point to 4.9 percent, shy of Beijing’s own growth target of about 5 percent for 2024. The economy recorded a growth of 4.8 percent in the first nine months of the year.

Lenders also mentioned Recent commitments To improve support for social welfare and consumption by Xi’s economic planners and to implement fiscal and tax reforms. But it said more details were needed to boost household and business confidence.

“Conventional stimulus measures will not be enough to revive growth,” the World Bank said, reiterating China’s calls for deeper reforms in education, health care, social welfare protection, pensions and across the World Bank. hukou Family Registration System.

China’s economic growth has slowed this year Weak domestic demand and deep inflationary pressures, after a three-year slump in the property market that has hit household wealth.

Xi focused economic attention on investment in high-tech manufacturing and industry, but there is growing concern that exports, which have helped boost growth, Tariffs face new threats under Donald TrumpWho will return as US President next month.

The World Bank also released a new analysis of economic dynamics in China for 2010-21, which showed that more than half a billion people are at risk of falling out of the middle class after just one generation out of poverty, according to its definition.

The bank credited Beijing with its “dramatic success” in lifting 800 million people out of poverty over the past 40 years, and noted that the share of low-income people in the population fell from 62.3 percent to 17 percent during that period.

But it also found that 38.2 percent of China’s 1.4 billion people are in the “secure middle class” — above the defined low-income line but not “free from the risk of falling below it.” The low-income level was defined as up to $6.85 per day using the 2017 affordability parity calculation.

“No other region in the world has grown its share of the secure middle class population faster than China,” the World Bank said. “Yet, a large portion of the population is still not economically secure.”

That vulnerable segment of the population was larger than the 32.1 percent considered “safe” in the middle class and 17 percent of low-income earners as of 2021, the middle of the Covid pandemic.

Bert Hoffman, the World Bank’s former Beijing-based country director for China, now at the National University of Singapore, wrote earlier this month that the post-Covid performance of the Chinese economy exposed weaknesses built up since significant reforms last fiscal year. system in 1994.

However, he noted some “hopeful signs” that reforms were in the pipeline, with statements from policymakers in the second half of 2024 pointing to improvements in income distribution and social security.

“Financial reform is now clearly tied to the Chinese Communist Party’s core goal of ‘high-quality growth,’ and the leadership recognizes that reform should result in a financial system that can deliver efficiency, equity, and stability,” writes Hoffman in the Asia Society’s 2025 Forecast.

“A key question is whether the reforms will be sufficient to transform monetary policy into a powerful tool for resource allocation, economic stability and income distribution.”