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Growth projection for China unchanged

2015-09-020BrowseIndex

The World Bank maintained its projection for China's economic growth at 8.7 percent, saying the regional impact of Japan's recent multiple crises is temporary and limited, according to a World Bank's press conference on the East Asia economy Monday. World Bank estimates that the monetary toll from Japan's economic disaster would range from $122 to $235 billion, equivalent to 2.5 to 4 percent of its GDP. "At this stage, we expect the economic impact of this (Japan's) disaster on the East Asian region to be fairly short- lived," said Vikram Nehru, World Bank chief economist for East Asia and the Pacific region. "In the immediate future the biggest impact (to the region) will be in terms of trade and finance," he added.

 A 1-percent appreciation in the Japanese yen would translate into a $250 million increase in annual debt servicing on yen-denominated assets held by East Asia's developing nations. China holds about 8 percent of long-term debt in yen, World Bank estimates. The short-term appreciation of the Japanese yen is due to the fact that Japanese companies tried to sell off overseas assets in exchange for yen for rebuilding at home, but the yen is depreciating in the long term, said Zhu Baoliang, chief economist with the State Information Center. The Japanese yen appreciated slightly above 3 percent against the US dollar on March 16, a week after the earthquake and tsunami, but the value appreciation gradually retreated to less than 1 percent yesterday. But the injection of several trillion yen by Japan's central bank and capital inflow back to Japan for reconstruction might push up international commodity prices later and add inflation pressure on China in the long-term, Zhu said.

Unlike US and European countries that might benefit from Japan's post-quake production interruption as they compete against each other, China has close partnership with Japan in the global supply chain, Zhu said. The halted production in Japan affects China's sectors like automobile, electronic components and high-end equipment due to their reliance on Japanese intermediate goods into their production processes, Zhu noted. But China might also see increasing exports to Japan in food and raw materials for reconstruction, that may mitigate, to some extent, the negative impact to China's trade, Chang Jian, China economist with Barclays Capital, told the Global Times. "We didn't downgrade the projection for China's economic growth because of Japan," said Ardo Hansson, World Bank's Lead Economist for China. Chang Jian, an economist at Barclays projected China's GDP growth for this year will be 9.3 percent.