In its latest China Quarterly Update, WB in conjunction with the International Monetary Fund has forecast China’s growth in exports for 2009 to be 3.5%, far short of the 11% estimate for 2008.
The bank noted that China’s overall economic growth was sensitive to export developments.
“Gross exports are almost 40 per cent of GDP,” WB said.
“About one-half of exports is from processing trade, and the share of exports in value-added terms is probably less than 20 per cent.
“Nonetheless, exports are more important in China than in other large emerging market economies, even as China is more robust than most to external shocks, because of its strong macroeconomic fundamentals and large balance of payment surpluses.”
While exports are expected by the bank to take a dive to 3.5% growth next year, China’s net imports are projected to fall slightly to 6.5% for 2009 against the 6.9% estimate for 2008, marking the first time estimated import growth has exceeded export growth for years.
However, the World Bank is still forecasting China’s gross domestic product to grow 7.5% for 2009, largely due to an expectation of sustained low commodity prices next year, which is a concerning development for Australia’s export-orientated mining industries.
“Despite export volume weakness, China’s current account surplus is likely to increase further in 2009 due to the lower raw commodity prices,” WB said.
“Even as import volumes are likely to outpace export volumes significantly, the large improvement in the terms of trade due to lower primary commodity prices is set to boost the current account surplus to almost $US430 billion, or 9 per cent of GDP, in 2009.
“The World Bank expects China’s terms of trade to improve 5.5 per cent in 2009, after worsening by 8.8 per cent in 2008.”
The recently announced 4 trillion yuan ($A893 million) Chinese government economic stimulus package, along with other measures, has the bank forecasting around half of its estimated 7.5% GDP growth for 2009 coming from government-influenced spending.
In the meantime, the bank expects private sector investment to be weighed down by the continued weakness in the country’s real estate market and by “unfavourable external prospects”.
Private consumption growth is expected to soften next year, but the bank believes it will receive support from the government’s fiscal policy.
“The stimulus policies provide China with a good opportunity to rebalance its economy in line with the objectives of the 11th five-year plan,” WB said.
“The stimulus package contains many elements that support China’s overall long-term development and improve people’s living standards.
“Some of the stimulus measures give some support to the rebalancing of the pattern of growth from investment, exports and industry to consumption and services.”
