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WB official: China a 'bright spot' in 2009 world economy

(Xinhua)
Updated: 2009-04-21 19:22

China's economy is expected to be "relatively a bright spot" in 2009 although globally it is still going to be a very difficult year, a World Bank official said Monday.

David Dollar, the World Bank's country director for China, told Xinhua that compared to the rest of the world, China's economic prospects in 2009 are "pretty good."

Citing China's 6.1 percent GDP growth in the first quarter, Dollar said he believes the country's economy is picking up and will be able to meet the annual 6.5 percent growth the World Bank has forecast.

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"It is a very difficult year globally, but China is relatively a bright spot and it will have a positive spill-over effect on the rest of Asia and the world," he said.

"I don't think Chinese consumers can save the whole world, but they are making a very positive contribution to get the world economy to do better," he said.

The Beijing-based American economist returned to Washington for the spring meetings of the World Bank and the International Monetary Fund (IMF), which are expected to issue their analysis on the current global financial crisis and the world's economic prospects.

Dollar said two lessons should be drawn from the crisis. First, quite a few banks have got into trouble partly because the United States and other developed countries were pretty aggressive about deregulating their banking sectors, so more careful banking system regulations are needed globally.

"China has been doing a lot of right things, such as having quite good regulations on the banking system, so the banks did not get into trouble," he said.

The second lesson is that some big imbalances remained in global trade during the last decade. The United States developed the biggest trade deficit but other countries like Germany, Japan and China had the largest trade surpluses, Dollar said.

"We now know it is not a stable growth pattern. We really need some adjustments so we can have more balance," he said.

China, the biggest developing country and a leading exporter in the world, has also been very dramatically effected by the economic crisis, with its overall exports down by one-third in a few months and lots of workers losing jobs, Dollar said.

However, he praised the Chinese government's quick response to the crisis with a stimulus package that has yielded some economic improvement in recent months. For example, industrial output in March was up 8.3 percent from a year earlier, "which is pretty good in this global environment," Dollar said.

He said his office is helping China meet its development objectives by providing analytical reports on economic policies, the current situation, as well as direct involvement in some of the country's stimulus projects.

One of his suggestions is that China should develop "a stronger domestic market, encourage more consumption, and provide better logistic and retail services" to reduce dependence on export growth. It should also meet the needs of the people and provide a stable source of growth in the future.

On the need to reform global financial institutions like the World Bank and the IMF, which has been advocated by developing countries for years, Dollar said most people agree that the voting share in an institution should reflect the weight a particular country has on the world economy.

"The voting share in the World Bank and the IMF basically reflects what the world looked like 30 or 40 years ago. The world has changed a lot, and in particular, the Asian developing countries have been growing very rapidly," he said.

"Gradually, we will get some reform on voting share so Asian developing countries, especially China, can be more weighty in the institutions," he said.

Dollar also said that the global currency proposal by China recently is a good idea in the long run, as long as it is established on a solid foundation.

"I am in favor of moving toward that direction, but it will take a while to get that kind of coordination among big economies, " he said.

"Let's start the process by having that coordination and stabilize exchange rates," he said, "and overtime, it is a great idea to have some kind of regional or global currency."