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The World Bank has raised its short-term economic forecast for China, while repeatedly calling on President Xi Jinping to pursue fundamental reforms to address lagging confidence and structural problems in the world’s second-largest economy. .
The multilateral financial institution on Thursday revised up its forecast for China’s GDP growth by 0.4 percentage points to 4.5% next year, reflecting a series of policy easing measures announced by the Chinese government over the past three months and stronger economic conditions. It was announced that. the country’s exports.
The World Bank also raised its full-year forecast for this year by 0.1 percentage point to 4.9%, just short of the Chinese government’s own 2024 growth target of around 5%. The economy recorded 4.8% growth in the first nine months of this year.
The lender also cited recent promises by President Xi’s economic planners to improve support for social welfare and consumption, and to implement fiscal and tax reforms. However, he said more detailed explanations were needed to boost confidence among households and businesses.
“Previous stimulus measures are not enough to revitalize growth,” the World Bank said, reiterating the need for further reforms across China’s education, health care, social welfare protections, pensions and society as a whole. Lake mouth Family register system.
China’s economic growth has slowed this year amid weak domestic demand and severe deflationary pressures, following three years of slump in the real estate market that has hit household wealth.
Mr. Xi has focused the economy on investment in high-tech manufacturing and industry, but exports that have helped boost growth face a new threat of tariffs under the return of U.S. President-elect Donald Trump. There are growing concerns that this may occur. month.
The World Bank also releases a new analysis of China’s economic mobility for 2010-21, which reports that more than 500 million people will drop out of the middle class just one generation after lifting themselves out of poverty. Indicated that there may be a risk. Definition.
The bank credited the Chinese government with its “dramatic success” in lifting 800 million people out of poverty over the past 40 years, during which time the proportion of low-income people in the population plummeted from 62.3% to 17%. he pointed out.
However, it also found that 38.2 percent of China’s 1.4 billion people belong to a “vulnerable middle class” that is above the defined low income line but is not “at risk of falling below”. Low income level was defined as up to $6.85 per day using 2017 purchasing power parity calculations.
“Nowhere else in the world has the share of the population in the secure middle class increased as rapidly as in China,” the World Bank said. “But a large part of the population is still not economically secure.”
This vulnerable segment of the population was larger than the 32.1% who were considered “safe” in the middle class and the 17% who remained low-income in 2021, in the midst of the coronavirus pandemic.
Bert Hoffman, former Beijing-based World Bank country director for China and now at the National University of Singapore, said earlier this month that China’s economy’s lackluster performance post-COVID-19 was largely due to the previous major fiscal reforms. He wrote that it exposed the weaknesses that had been built up since then. 1994 system.
But he noted that there are “some hopeful signs” that reforms are on the way, following statements from policymakers in the second half of 2024 that pointed to improvements in income distribution and social security.
“Fiscal reform is now clearly linked to the Chinese Communist Party’s core objective of ‘quality growth,’ and the leadership believes that reform should result in a fiscal system that can achieve efficiency, equity, and stability. “We recognize that,” Hoffman said in the paper. Predictions for Asian society in 2025.
“The key question is whether this reform will go far enough to transform fiscal policy into a powerful tool for resource allocation, economic stability, and income distribution.”
