Uri Dadush, director of the World Banks International Trade Department and Development Prospects Group, said Tuesday that China is the major contributing factor to accelerated global economic growth, which is projected to grow by 4 percent this year, the World Bank press review reports.
China also retains the record high growth rate of developing economies. Dadush predicted that the growth rate of developing economies for this year will be higher than the average annual growth rates for both the 1980s and 1990s.
The strong demand stemming from Chinas rapid economic development, and continuous domestic demand in the United States led to unexpected growth rate of 10,2 percent in global trade. He said that the rapid hike in the economic growth in the United States and Japan is also an important contributing factor.
According to a World Bank outlook report on the global economy and developing countries, China is projected to achieve an economic growth rate of 9,25 percent this year, while Indias economic growth rate will be 6 percent.
Growth in those big economies have helped developing countries achieve a projected 6,1 percent growth rate, a record high in the past three decades, according to the report.
The Business Daily Update (China) adds the bank also said that Chinas economy will slow down to about 8 percent in 2005, and 7,1 percent in 2006 due to a slower world economy and higher prices of oil and other primary commodities. The world economy will grow by 3,2 percent annually in the coming two years.
Asia Pulse notes the World Bank report attributes Chinas good economic performance to the countrys loose credit policies and to its entry into the World Trade Organization. The report also said that Chinas rapid import growth, which is expected to exceed 30 percent this year, provides strong support to its neighboring East Asian economies.
Dadush further said that it is not in Chinas interest to make a very big, sudden change in its currency exchange rate in the short term. He said any change should be made gradually.
The short-term issue for China is how to conduct an appreciation of the yuan in a way that does not adversely affect the huge countrys banking system and domestic situation.
But in the long term, “China needs to recognize that, as any large economy, its monetary and fiscal policy concern should be its domestic balance, and not its exchange rate,” he said. As its economy is growing very fast, its exports account for a bigger share of its GDP.
– But I have little doubt that the long term policy for China is to move to a flexible exchange rate to be determined largely by the market, even though it may take many years, Mr. Dadush said.
Kilde: www.worldbank.org
