World Bank raises China growth forecast

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SHANGHAI, June 19 (AP): China's economy is weathering the global slowdown better than expected, the World Bank said Thursday as it raised its growth forecast for the Asian giant to 9.8 per cent from 9.4 per cent.

The World Bank cited the country's strong domestic demand and sustained competitiveness in exports as key strengths.

"Amid weaker and uncertain global prospects, China's growth will be supported by strong international competitiveness and a robust domestic economy," David Dollar, the bank's country director for China, told reporters in Beijing.

Just two months earlier, the World Bank had lowered its growth estimate for China to 9.4 per cent from 9.6 per cent on weakening demand for its exports.

The back-and-forth revisions reflect the uncertainties prevailing at a time when the US economic outlook remains murky due to the fallout from the mortgage lending crisis. They also result from a revision in China's own gross domestic product growth estimate for 2007, which was raised by a 0.5 percentage points following the bank's most recent half-yearly report in early April.

Despite the upbeat overall message, the quarterly report did note that China's growth is moderating as investment in factories, construction and other fixed assets slows.

Although the nominal rate of growth in such investments remains above 25 per cent on an annual basis, much of that increase reflects surging prices. Adjusted for inflation, real growth in such spending slowed to 16 per cent in January-May, with the greatest deceleration in industry - a sector most exposed to global trends, the report said.

"Global growth is on course to slow further and commodity price-driven inflation has become a complicating factor everywhere. These developments imply considerably more international uncertainty and risk," Dollar said.