The World Bank raised its 2013 economic growth forecast for China Wednesday, citing the government's fiscal stimulus plans and faster approval of large investment projects.
China's growth is projected to recover in 2013 to 8.4 percent due to the combination of monetary easing, local government fiscal stimulus, accelerated approval of investment projects and an upswing in the business cycle, the World Bank said in its East Asia and Pacific Economic Update published Wednesday.
The bank also forecast that growth will reach 7.9 percent for 2012, significantly down from 9.3 percent in 2011.
This was caused mainly by a slowdown in domestic demand following policy tightening to cool an overheating housing sector, and weaker external demand from high-income economies.
The World Bank's latest forecast for 2013 is higher than its earlier projection of 8.1 percent in a report released in October, but is slightly lower than the estimate made last week by the Chinese Academy of Social Sciences, a top government think tank, which forecast that GDP would grow by 8.5 percent next year, fuelled by government investment in infrastructure projects.
"China will still face a difficult external environment in 2013, so domestic demand, in the form of both consumption and investment, will be the main driving force for economic growth, which we estimate at between 8 and 8.5 percent for next year," Zhou Jingtong, a senior analyst at the Bank of China, told the Global Times Wednesday.
Zhou said a long-awaited reform of income distribution, expected to be published next year, as well as the government's increasing spending on social security will help raise household income and thus boost domestic consumption.
"I think the income distribution reform will aim at cultivating a growing number of middle-income people, who are vital to domestic consumption growth," he said.
Structural reforms in areas such as resource pricing, value-added tax, interest rates, capital account management and social spending are likely to see significant progress in 2013, Deutsche Bank said in a research note sent to the Global Times Monday.
The German bank also highlighted key risks for China's economy, namely weaker external demand and a potential oil price shock from the Middle East.
"A sensitivity test suggests that a 1.6 percent decrease in G2 (the US and China) GDP growth reduces China's GDP growth by 1 percent and would delay the expected recovery in China by about three quarters," the note said.
China's economic growth, however, is expected to slow to around 8 percent in 2014, as productivity and labor force growth are tailing off, the World Bank said.