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The World Bank has raised its near-term economic outlook for China while repeating calls for President Xi Jinping to make deep reforms to address lingering confidence and structural problems in the world's second-largest economy.
The international lender said on Thursday that it has revised its forecast in ChinaGDP growth next year to increase by 0.4 percent to 4.5 percent, reflects a series of measures to reduce the policy announced by Beijing in the past three months and the strength of the country's exports.
The World Bank also raised its full-year forecast for this year by 0.1 percentage points to 4.9 percent, just shy of Beijing's 2024 growth target of about 5 percent. The economy recorded growth of 4.8 percent in the first nine months of the year.
The lender also noticed recent promises by Xi's economic planners to improve social support and consumption, and to implement fiscal and tax reforms. But it said more details were needed to bolster household and business confidence.
“Ordinary stimulus measures will not be enough to stimulate growth,” the World Bank said, reiterating its calls for deep reforms in China's education, health care, social security, pensions and education. there household registration process.
China's economic growth slowed this year to less weak domestic demand and deep deflationary pressures, following a three-year slump in the housing market that created household wealth.
Xi has emphasized the economy's focus on investment in high-tech manufacturing and industry, but there is growing concern that exports, which have helped boost growth, will faces a renewed threat of tariffs under Donald Trumpwho will return as US president next month.
The World Bank also released a new analysis of China's economic growth for 2010-2021, which showed that more than half a billion people are at risk of falling out of the middle class just a generation after rising out of poverty, according to it. definitions.
The bank thanked Beijing for the “huge success” of lifting 800 million people out of poverty over the past 40 years, and noted that during this period the share of low-income residents has fallen significantly, from 62.3 to 17 percent.
But it also found that 38.2 per cent of China's 1.4bn people are in the “risky middle class” – above their defined minimum income line but “uncomfortable with the risk of falling below it”. The lowest income level has been reported to be up to $6.85 per day using the 2017 purchasing power rating.
“No other region of the world has seen a faster increase in the share of the secure middle class than China,” the World Bank said. Yet, the majority of the population is still economically insecure.
That segment of the population at risk was greater than the 32.1 percent considered “safe” in the middle class and the 17 percent who remain on low income as of 2021, in the midst of the Covid pandemic.
Bert Hofman, former Beijing country director for China at the World Bank, now at the National University of Singapore, wrote earlier this month that China's dysfunctional post-Covid economy has revealed weaknesses built up since the last major monetary reform. program in 1994.
However, he noted some “hopeful signs” that reforms were on the way, after the statements of policy makers in the second half of 2024 that referred to the improvement of income distribution and social security.
“Financial reform is now clearly tied to the Chinese Communist Party's goal of 'high-quality growth', and the leadership understands that reform must result in a financial system that can deliver efficiency, equity and stability,” Hofman said. Asia Society Forecast to 2025.
“The key question is whether reforms will go far enough to transform monetary policy into a powerful tool for resource allocation, economic stability, and income distribution.”