BEIJING, Nov 3: The World Bank said on Thursday China’s economy is likely to remain strong next year but warned it is time to look for new growth models that will let more people get a fair share of the pie.
China’s economy is forecast to expand 9.3 per cent this year, moderating to 8.7 per cent in 2006, strengthening the case for projecting a “soft landing,” the bank said in its China Quarterly Update.
“China’s growth is holding up unexpectedly well,” Bert Hofman, the World Bank’s chief economist for China, told a briefing in Beijing. “We had expected a bit more of a slowdown.”
Chinese policymakers have been scrambling for the past two years to engineer a gentle slowdown of the economy, aiming to cool down overheated sectors without throwing millions out of their jobs.
They now seem to be succeeding as an expected slowdown in exports will probably be partly offset by more active spending at home by consumers and enterprises.
Exports in 2006 are expected to rise 15.5 per cent, down from a forecast 23.6 per cent for this year, the World Bank said.
The slowdown will come despite a pickup in global demand because of supply-side factors including a levelling off in foreign direct investment, which typically ends up being used to build new factories in export zones.
Domestic consumption next year is seen growing 7.3 per cent, up slightly from a seven-per cent increase this year.
“Household consumption will be supported by recent high income growth. In addition, planned tax policy should support household after-tax incomes in 2006,” the report said.
One recent tax measure that could help boost consumer spending is a doubling of the personal income tax threshold to 1,600 yuan (198 dollars). “(It) will reduce the tax burden and exempt many income earners from paying income tax.”—AFP
