"There is the potential for growth to be bumping along the bottom for longer," Ardo Hansson, the World Bank's lead economist for China, told a news conference to release the multilateral lender's quarterly update on China. The Bank's new growth forecast for the world's second-biggest economy would mark a 13-year low, compared with an 8.4 percent, 11-year-low estimate in November 2011. An 8.2 percent expansion would mean China's economy was growing slightly below its potential rate, Hansson said. In economic terms, it implies Beijing has space to tweak policies to boost growth without igniting inflation. "We see cyclical weakness continuing, but that the prospects for a soft landing remain high," Hansson said, adding that Beijing had considerable fiscal resources available to help bolster the economy if risks to the downside accelerate. The Bank's economics team believes that when recovery does come, most likely by the middle of the year, but possibly not before the third quarter, its shape would be somewhere between a vigorous 'V' and a flat 'L'. Though the report characterizes the bounce as mild, it is faster than expected in November, when 2013 growth was estimated at 8.4 percent compared with 8.6 percent in the latest report. The World Bank forecast China's export growth at 9.7 percent this year and 11.6 percent in the next, with import growth likely at 12 percent in 2012 and 12.5 percent in 2013.
That outcome would see external demand having a negative contribution to growth for a second successive year, with trade subtracting 0.3 percent from GDP in 2012 and adding nothing at all in 2013, according to the Bank's forecasts.
While risks to overseas demand for goods from China's vast factory sector were seen as a key external restraint on growth in the near term, the bigger problem was domestic real estate. The report welcomed the gradual cooling of a sector that had been in the grip of a speculative frenzy before the government unveiled a slew of policies to calm it two years ago. But it cautioned that downside risks were centered on that adjustment. "Given the significance of the sector in the overall economy, continued vigilance will be required to contain negative spillover effects," the report said. "A more amplified downturn could have negative economy-wide impacts." Real estate investment made up about 13 percent of China's GDP in 2011 and directly affects about 40 different industries.