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East Asia & Pacific is facing some great development challenges today: urbanization, protection of the environment, the need to find renewable energy sources and many others. This site wants to create a conversation around those important issues. More »

growth model

China: what long-term policies and reforms are needed to sustain growth?

Submitted by Louis Kuijs on Tue, 2009-06-30 13:15

In a previous blog I summarized our views on China’s growth prospects, developed while writing the World Bank’s recent China Quarterly Update economic report. We think that China is likely to continue to see respectable growth in a difficult global environment. At this important juncture for China and the world economy, what is the upshot of this for policymaking?

At any point in time, governments need to work on short-term macroeconomic policies and on more medium- and long-term policies. There are trade-offs. More attention to short-term policies typically means less attention to the policies and reforms that are important for the medium and long term. We think that, given that China has already put in place a forceful short-term stimulus that seems effective in keeping growth respectable, China can put more emphasis on the structural reforms to promote continued, sustainable growth.

There continues to be a lot of discussion in China whether GDP growth will reach the government target of 8 percent this year, and whether the government should put in place more stimulus measures, typically presumed to be the kind of infrastructure-oriented stimulus that characterizes the package already in place.

I think it would not be a good idea to add more traditional, infrastructure-oriented fiscal stimulus in 2009. Why?

How can China keep on growing while its exports are shrinking?

Submitted by Louis Kuijs on Wed, 2009-06-17 22:05

Getting a clear view on where China’s economy is heading is not easy at the moment, as evidenced by large variations in GDP growth forecasts. One of the confusing developments is that while exports have continued to do badly recently, the domestic economy has exceeded most observers’ expectations by a wide margin.

Working in recent weeks on the World Bank’s new China Quarterly Update, released today, we have been trying to determine how the economy has been doing on balance, what the prospects are, and what this means for economic policy. In this blog, I will summarize our understanding of recent developments and prospects, leaving the upshot for economic policies for a later discussion (keep reading after the jump).

Can China become the engine for world economic growth?

Submitted by David Dollar on Wed, 2009-05-20 12:40

This somewhat provocative question was the title of a conference hosted by Oxford and Standard Charter this week in London.  My answer was: "No, not tomorrow; but yes, eventually – especially if China continues to vigorously pursue economic reform."
 
The reason that China cannot be the engine of global growth tomorrow is straight-forward.  For the last decade an awful lot of the final demand in the world has come from the U.S.  That era is over for the time being as U.S. households now concentrate on rebuilding their savings.  No one country can fill the gap left by the slowdown in U.S. consumption: Japan, Germany, and China together have less consumption than the U.S., so no one of them can replace the U.S. as the major source of demand in the world.  It's not realistic to expect China to play that role.  But we are probably moving into a more multi-polar period in which there is more balanced growth in all of the major economies. 

Your questions on China's economy answered - see the transcript

Submitted by James I Davison on Thu, 2009-03-26 14:38

In case you weren't able to join World Bank economists and regular bloggers David Dollar and Louis Kuijs earlier today in a live online chat, a transcript from the in-depth discussion is available here. David and Louis spent an hour and a half answering more than 30 questions about the recently released China Quarterly Update economic report, as well as topics ranging from foreign trade, health care reform and the long-term impact of the financial crisis on China's economy.

Also, recently on the blog David wrote about the data behind the Bank's recent economic report in, "Reading tea leaves for signs of China's recovery," and Louis wrote about the policy choices facing the country in, "China and stimulus packages: the best way to respond to more bad news?"

Do you have any follow-up questions about the report or China's economy? Submit them in the comments section below.

Chat live with China experts David Dollar and Louis Kuijs on March 26

Submitted by James I Davison on Mon, 2009-03-23 09:25

With the release last week of its latest quarterly assessment of the Chinese economy, the World Bank lowered its projection for China's GDP growth to 6.5 percent in 2009, yet remained optimistic that the country's economy has started to show signs of stabilizing amid global financial turmoil. The Bank's China country director David Dollar explained on his blog the statistics behind the forecasts in the China Quarterly Update and explored the signs of China's recovery.

Do you have your own questions about the report? Are you wondering what else might be in store for China? David Dollar and Senior Economist Louis Kuijs, will answer questions Thursday in a live online chat. You can join them on March 26 at 9:30 a.m. in Washington, DC, which is 9:30pm in Beijing, China, or submit your questions in advance for a better chance to have them answered. Check it out here.

Reading tea leaves for signs of China's recovery

Submitted by David Dollar on Tue, 2009-03-17 22:00

Click chart to see larger version.

What to make of it when, within a few hours last week, the statistical bureau depressed us with a 26% decline in exports for February and then elated us with a 27% increase in urban fixed asset investment? These two figures capture nicely the struggle that is going on within the Chinese economy.

We launched our China Quarterly report today with our take on how to reconcile the conflicting data. Clearly, the global economy is in very poor shape. Global GDP declined at an annualized rate of 5% in the fourth quarter of 2008, and global industrial production declined at a 20% rate. These are shocking numbers that those of us born after the 1930s have never seen. Naturally this has had a large effect on China, which is an open, export-oriented economy. China's seasonally adjusted monthly exports peaked at around $120 billion last fall, and then fell off a cliff – dropping by about one-third (see chart).

Discussing China's new growth model: the role of consumption

Submitted by David Dollar on Thu, 2009-03-12 16:16

The Hebei province produces one-quarter of China's steel, and has felt sharply the country's slowdown in investment during the financial crisis.

Last week I had the honor to be the first foreigner to speak at the Hebei Provincial Party School in Shijiazhuang, China. The school provides a range of mid-career training programs to local officials from this province, about the size of France. The topic was the global economic crisis and China's need for a new growth model.