China's Economy Expected to Grow 9.5% in 2010


China's economic growth is expected to accelerate to near double-digit levels this year, as exports recover and household consumption remains strong, according to the World Bank's quarterly assessment released Wednesday.

In 2010, China's economy is expected to grow 9.5%, compared with a growth rate of 8.7% last year that was driven by a "massive" investment stimulus effort. The World Bank, as a result, is calling on the government to tighten its macroeconomic policy in the New Year in a move to fight off inflation concerns and a real estate bubble.

"We project 9.5% GDP growth for this year, with a shift in the composition," Ardo Hansson, the World Bank's lead economist for China, said in a statement. "Government-led investment is bound to decelerate. But, exports are likely to continue to recover amidst a pick up in the global economy, real estate activity is likely to grow strongly this year and consumption should remain solid."

Real estate values in China's urban areas soared last year, fostering concerns of a real estate bubble. The World Bank notes China should consider higher interest rates and may be able to temper any significant inflation in 2010 by a tighter monetary stance and stronger exchange rates.

Meanwhile, the World Bank applauds moves that Chinese officials have taken to increase their vigilance over lending by local government entities and recommends that local governments become less reliant on revenues from land transactions.

Recently, China has responded to surging property prices with policy measures designed to expand supply and curb speculation, according to the financial institution's report.

In the area of exports, the World Bank notes that China's short-term prospects appear healthy, but toward the end of the year the picture remains less clear.