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China quarterly update, June 2009 (English)

China's economy has continued to feel the brunt of the global crisis. Global economic activity continued to decline in the first part of 2009, even as tentative signs of stabilization have emerged recently in several countries. However, very expansionary fiscal and monetary policies have kept the economy growing respectably. Fiscal stimulus is centered on the infrastructure-oriented 'RMB 4 trillion' stimulus plan and the monetary stimulus has led to a surge in new bank lending. Government-influenced investment has soared. Market-based investment has lagged, although positive signs have emerged in the real estate sector. Consumption has held up well. Very weak exports have continued to be the main drag on growth, but import volumes have recovered in the second quarter of 2009 as raw material imports rebounded. One reason is that the fiscal deficit is likely to be significantly higher than budgeted and additional stimulus now reduces the room for stimulus in 2010. Nonetheless, with subdued global demand and less export growth, China needs more growth from domestic demand, consumption in particular. Also, relative prices need to change, notably those of natural resources. The transition to more consumption-led, service sector-oriented, and labor-intensive growth requires policy adjustments that: (i) help channel resources to sectors that will grow in the new setting, instead of to sectors that have traditionally done well; and (ii) support thriving domestic markets and successful, permanent urbanization. Such reforms can be pursued more successfully if flanked by a well-functioning public finance system and social safety net.


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    East Asia and Pacific,

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    China quarterly update, June 2009

  • Keywords

    inflation;market base;raw material price;barriers to private sector participation;downward pressure;spare capacity;consumption;monetary policy;policy and structural reform;bank lending;financial market;high real interest rate;short term interest rate;access to external finance;foreign exchange reserve accumulation;gross fixed capital formation;intergovernmental fiscal system;industrialized country;potential output;Industrialized countries;fiscal deficit;public finance system;household saving rate;short term credit;export of goods;short term lending;global market share;domestic demand;stimulus package;world economy;liquid foreign exchange;global growth prospects;import of goods;oil price fluctuation;open capital market;household survey data;terms of trade;nominal income growth;Real estate;capital stock;financial system;import volume;flexible exchange rate;mature market economy;drag on growth;financial sector policy;water and environmental;receivables as collateral;allocation of credit;rapid capital accumulation;input output table;quality of bank;consumer price inflation;current account balance;medium term growth;household expenditure data;regional income inequality;cost of fund;rapid credit expansion;amount of liquidity;financial sector problem;impact of reforms;foreign reserve accumulation;Social Safety Nets;fiscal policy response;euro zone;global economic recovery;global environment;global economy;economic growth prospects;access to finance;liquidity injection;international financial market;domestic financial market;Fiscal Stimulus;government bond yield;interest from investor;national account;farm output price;lower interest rate;rural income;consumer confidence;international capital flow;



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China quarterly update, June 2009 (English). Washington, D.C. : World Bank Group.