The World Bank raises China’s growth forecast but calls for serious reforms

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The World Bank has raised its near-term economic outlook for China as it reiterated calls for President Xi Jinping to push for deep reforms to address lagging and structural problems in the world’s second-largest economy.

The multilateral lender said on Thursday that it has upgraded its forecast for ChinaGDP growth next year is expected to range from 0.4 percent to 4.5 percent, reflecting a series of policy measures announced by Beijing over the past three months as well as stronger exports.

The World Bank also raised its full-year forecast for this year by 0.1 percent to 4.9 percent, just shy of Beijing’s 2024 growth target of around 5 percent. The economy reports growth of 4.8 percent in the first nine months of the year.

The borrower also noticed the latest commitment by Xi’s economic planners to improve social support and spending, and to implement fiscal and tax reforms. But it said more data is needed to boost household and business confidence.

“Normal stimulus measures will not be enough to boost growth,” the World Bank said, repeating its call for deep reforms in China’s education, health care, social security, pensions and hey family registration process.

China’s economic growth has slowed this year under less domestic demand and deep deflationary pressures, following a three-year slump in the stock market that decimated household wealth.

Xi focused the economy on investment in the high-tech industry and manufacturing, but there are growing concerns that imports, which have helped boost growth, will. face a renewed threat of tariffs under Donald Trumpwho will return as the president of the United States next month.

The World Bank also released a new analysis of China’s economic dynamics for 2010-2021, which showed that more than half a billion people are at risk of falling out of the middle class after breaking out of poverty, according to the report. it. comments.

The bank credits Beijing with “great success” in lifting 800 million people out of poverty over the past 40 years, and noted that during that time the proportion of people with low incomes has fallen significantly, from 62.3 percent to 17 percent.

But it also found that 38.2 per cent of China’s 1.4bn people were in the “vulnerable middle class” – above their minimum income threshold but not “at risk of falling below it”. The low income level was defined as up to $6.85 per day using 2017 energy purchase figures.

The World Bank said: “No other place in the world has seen a faster increase in the share of the secure middle class than China.” However, a large number of the population is not yet economically secure.

That share of the vulnerable population was greater than the 32.1 percent who were considered “safe” in the middle class and the 17 percent who remained in low income as of 2021, in the middle of the Covid pandemic .

Bert Hofman, former Beijing country director for the World Bank, now at the National University of Singapore, wrote earlier this month that China’s post-Covid economic recovery has exposed built-in vulnerabilities since a major financial reform was carried out. administration in 1994.

However, he noted “hopeful signs” that changes are underway, based on policymakers’ statements in the second half of 2024 that pointed to improving income distribution and security of the community.

“Financial reforms are now clearly linked to the Chinese Communist Party’s central goal of ‘quality growth’, and the leadership recognizes that reforms should bring about a financial system that can bring prosperity, equity and stability,” said Hofman. 2025 Vision for Asia Society.

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