The Wall Street Journal-20080205-World Bank Cuts Forecast for China-s Economic Growth

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World Bank Cuts Forecast for China's Economic Growth

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BEIJING -- The World Bank said yesterday it cut its forecast for China's economic growth this year because of a weakening global economy, but it raised its forecast for China's inflation rate, citing surging global food prices and domestic-policy-induced cost increases.

The bank cut its forecast of China's gross-domestic-product growth in 2008 to 9.6% from its previous forecast of 10.8% and raised its forecast for the consumer-price index to a 4.6% rise, up from its previous forecast of a 3.8% increase.

The World Bank said that China's monetary policy will likely continue to focus on controlling credit and managing the volume of funds entering the economy, as external surpluses remain large. It also said Beijing needs to make its exchange rate more flexible.

Beijing will likely face constraints in raising interest rates if the U.S. Federal Reserve cuts its interest rates further, the bank also said.

A global economic slowdown is likely to affect China's exports and investment, said David Dollar, the World Bank's country director for China. He said China's demand is expected to remain robust, however, and a modest global slowdown could contribute to rebalancing the economy, which accelerated to a 13-year-high growth rate last year of 11.4% from 11.1% in 2006.