World Bank lifts China growth forecast but calls for deeper reforms

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The World Bank raised its near-term economic forecasts for China while reiterating calls for President Xi Jinping to pursue deep reforms to address declining confidence and structural problems in the world’s second-largest economy.

The multilateral bank said on Thursday it had revised up its forecast for China’s GDP growth next year by 0.4 percentage point to 4.5 percent, reflecting a series of policy easing measures announced by Beijing over the past three months as well as the strength of the economy. The country’s exports.

The World Bank also raised its full-year forecast for this year by 0.1 percentage point to 4.9 percent, slightly below 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 bank also noted recent pledges by President Xi’s economic planners to improve support for social welfare and consumption and implement reforms to financial and tax systems. But she said more details were needed to boost household and business confidence.

“Traditional stimulus measures will not be enough to stimulate growth,” the World Bank said, reiterating its calls for deeper reforms in China’s education, health care and social welfare and pension protection sectors. Hoku Family registration system.

China’s economic growth has slowed this year amid weak domestic demand and deep deflationary pressures, following a three-year decline in the property market that has hurt household wealth.

Xi has focused the economic focus on investment in manufacturing and high-tech industry, but there are growing concerns that exports, which have helped support growth, will face a renewed threat of tariffs under Donald Trump, who will return as US president next month. .

The World Bank also released a new analysis of China’s economic mobility for the period 2010 to 2021, which showed that more than half a billion people are likely to be at risk of falling out of the middle class after just one generation out of poverty. According to their definitions.

The bank credited Beijing with the “great success” of lifting 800 million people out of poverty over the past forty years, and noted that during this period the share of the low-income population fell sharply, from 62.3 percent to 17 percent.

But it also found that 38.2 percent of China’s 1.4 billion people were in the “weak middle class,” above a defined low-income line, but not “free from the risk of falling below it.” The low income level was defined as up to $6.85 per day using 2017 purchasing power parity calculations.

“No other region in the world has seen the share of the secure middle class population increase faster than China,” the World Bank said. “However, a large majority of the population is not yet economically secure.”

This vulnerable segment of the population was larger than the 32.1 percent considered “safe” in the middle class and the 17 percent that will remain low-income from 2021, in the middle of the Covid pandemic.

Bert Hoffman, the former country director for China at the World Bank in Beijing who is now at the National University of Singapore, wrote earlier this month that the lackluster performance of the Chinese economy post-Covid exposed the vulnerabilities that had accumulated since the last major revamp of the financial system. . In 1994.

However, he pointed to some “hopeful signs” that reforms are in the works, following statements by policymakers in the second half of 2024 that indicated improved income distribution and social security.

“Financial reforms are now clearly linked to the Chinese Communist Party’s core goal of ‘high-quality growth,’ and the leadership recognizes that reforms must lead to a financial system capable of efficiency, fairness, and stability,” Hoffman wrote in an article. Asia Society 2025 Outlook.

“The key question is whether the reforms will go far enough to transform fiscal policy into a powerful instrument for resource allocation, economic stability, and income distribution.”