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The World Bank has raised its near-term economic forecasts for China while reiterating calls for President Xi Jinping to undertake sweeping reforms to address lack of confidence and structural problems in the world’s second-largest economy.
The multilateral lender said on Thursday that it had revised its forecast for ChinaGDP growth will rise 0.4 percentage points to 4.5 percent next year, reflecting a series of easing measures by Beijing in the last three months as well as the strength of the country’s exports.
The World Bank also raised its full-year forecast for this year by 0.1 percentage points to 4.9 percent, just below Beijing’s own growth target for 2024 of around 5 percent. The economy recorded growth of 4.8 percent in the first nine months of the year.
The lender also noticed this current commitments Xi’s economic planners decided to improve support for social welfare and consumption and implement tax and fiscal system reforms. However, more details are needed to boost household and business confidence.
“Conventional stimulus measures will not be enough to revive growth,” the World Bank said, reiterating its calls for deeper reforms in education, healthcare, social protection and pensions in China Hukou Household registration system.
China’s economic growth has slowed this year weak domestic demand and strong deflationary pressures after a three-year slump in the housing market that hit household wealth.
Xi had placed an economic emphasis on investing in high-tech manufacturing and industry, but there is growing concern that exports, which have helped support growth, will too Under Donald Trump we are threatened with tariffs againwho will return as US president next month.
The World Bank also released a new analysis of economic mobility in China from 2010 to 2021, showing that more than half a billion people may be at risk of leaving the middle class just one generation after rising from poverty. according to his definitions.
The bank praised Beijing for its “dramatic success” in lifting 800 million people out of poverty over the past 40 years, noting that the share of the population on low incomes had fallen sharply over that period, from 62.3 percent 17 percent.
However, it also found that 38.2 percent of China’s 1.4 billion people were in the “vulnerable middle class,” meaning above the defined low-income threshold but not “free from the risk of falling below it.” Low income level was defined as up to $6.85 per day using 2017 purchasing power parity calculations.
“No other region in the world has seen a faster increase in the share of the secure middle class than China,” the World Bank said. “However, a significant majority of the population is still not economically secure.”
This vulnerable portion of the population was larger than the 32.1 percent considered “safe” in the middle class and the 17 percent who remained low-income in 2021, in the midst of the Covid pandemic.
Bert Hofman, a former Beijing-based country director for China at the World Bank now at the National University Singapore, wrote earlier this month that the Chinese economy’s weak post-coronavirus performance exposed weaknesses that have emerged since the last major overhaul of the financial system got in 1994.
However, he noted some “hopeful signals” that reforms were in the pipeline after policymakers made statements in the second half of 2024 that pointed to improvements in income distribution and social security.
“Financial reforms are now clearly linked to the Chinese Communist Party’s core goal of ‘high-quality growth,’ and the leadership recognizes that reforms should lead to a financial system that can ensure efficiency, fairness and stability,” Hofman wrote in an article 2025 forecast for the Asia Society.
“A key question is whether the reforms will go far enough to make fiscal policy an effective tool for resource allocation, economic stability and income distribution.”
