China set for ‘aggressive’ economic steps, World Bank chief says
China is likely to take “very aggressive” steps to kick-start its slowing economy after a once-in-a-decade leadership shuffle next month, the World Bank’s newly installed chief said on Thursday.
“In talking with the Chinese authorities, I’m completely convinced that they understand exactly the nature of the problem and they are taking every measure” to boost growth, said Jim Yong Kim.
“They are going through a political change right now, and once the political change is complete, my sense is that they’ll be very aggressive in trying to restore growth,” he added.
Kim, appointed head of the World Bank in July, made the comments in Tokyo at the annual meetings of the Bank and International Monetary Fund, which has cut its growth forecasts for China, the world’s second-biggest economy.
China has suffered the knock-on effect of a severe debt crisis in Europe and a hobbled recovery in the United States, its two key export markets, which have led to a slump in trade and contraction in manufacturing activity.
Authorities have moved to spur the economy by slashing interest rates twice in quick succession this year and cutting the amount of funds that banks must keep in reserve three times since December in a bid to encourage lending.
On Tuesday, the Washington-based Fund said the stimulus had failed to deliver an expected boost, and it now expected Chinese growth of 7.8 per cent this year and 8.2 per cent next year.
That is down from a July estimate of 8.0 per cent and 8.5 per cent, respectively.
China’s economy expanded by 7.6 per cent in the second quarter of this year, its worst performance in three years, and disappointing data since then has led to fears that third-quarter growth may have weakened further.
The country’s political scene is gearing up for a major leadership change at the helm of the ruling Communist Party with Vice-President Xi Jinping widely tipped to succeed President Hu Jintao as China’s next leader.