World Bank: China's economy to grow 9.2%
(AFP)
Updated: 2006-02-09 14:31

China's economy will grow by 9.2 percent this year but continue to face challenges from its over-reliance on investment and insufficient growth in domestic consumption, the World Bank said.

The bank offered a "benign" outlook for the world's fastest growing major economy in its China Quarterly Update, attributing growth to strong demand for its exports, continuing robust investment and increasing domestic demand.

However, consumption is not expected to expand fast enough in 2006 to achieve the government's goal of more balanced growth, largely due to subdued rises in already low rural incomes, the report said.

To achieve more balanced growth, the government will need to invest more on social services, such as health care, education and a social safety net to encourage farmers and others to spend more, the bank said.

"We believe (the government) should ... shift spending from more investment-oriented to consumption-oriented," Bert Hofman, the World Bank's chief economist for China, told a briefing in Beijing.

The World Bank's China forecast of 9.2 percent for 2006 was up from a prediction of 8.7 percent given in its previous quarterly update.

The organization said the revised figure was due to the government's announcement in December last year that the size of economy had been underestimated by 16.8 percent in 2004 and so was not due to any change in the general economic situation.

The world's fastest growing economy grew 9.9 percent in 2005, elevating it to the world's fourth biggest, from seventh place previously, overtaking France and Britain.