Soft landing predicted for China

CHINA's booming economy - the dynamo of Asia - will turn in another strong performance next year, even as officials apply the brakes to curb local overheating and growth elsewhere cools, the World Bank said today.

Such forecasts will bolster the confidence of many Western businessmen who have invested billions of dollars, pounds and euros in the world's most populous country to take advantage of its remarkable economic growth.

China's expansion is lifting millions out of poverty and fuelling a steep rise in incomes in urban and rural areas, the Bank added in its twice-yearly assessment of East Asia.

The direction of the mainland economy has fallen under a harsh spotlight in recent weeks, after Beijing surprised markets last month with its first interest rate rise in nine years.

The move was one of many steps that China's economic mandarins have taken over the past year to curb what's seen as excessive growth.

'Policy measures to cool down the economy appear to have had some success, but it is still too early to call the end of the investment boom,' the Bank said.

It added that drastic, macro-economic measures to restrain growth in China were 'unlikely to be imminent, and if the economy lands at all, it is likely to be a soft landing'.

The Bank forecasts that China's economy would expand by 8% next year, down one percentage point from this year. This view is matched by some private-sector forecasts. Smith Barney has told clients that China's growth will ease next year to 7.8%, in part because there'll be more rate rises.

The Bank also said that underpinned by China's expansion, the number of poor people in East Asia - those who somehow manage to live on less than $2 (£1.08) a day - has dived by 29% or 254m people over the past five years. It is now at its lowest level ever.

'There could hardly be a more striking evidence as to the power of economic growth to reduce poverty,î the Bank concluded.

It estimated that rural residents' cash income in China grew 11.4% this year, outstripping the rise in urban incomes for the first time in six years.

The only major of note of caution in the Bank's health check was the potential impact of higher energy costs.

'The apparently remorseless rise in oil prices has heightened worries about the risk of a more serious downturn,' it said.

'These worries are exacerbated by the fact the oil price shock is occurring in the context of record and growing US current account deficits.'