Photo: By erinohara73 on flickr
The World Bank has hiked their GDP growth forecasts for China in its latest quarterly China report, based on stronger than expected economic data they’ve seen lately.They also don’t seem overly concerned about Chinese inflation, which essentially means they’re forecasting a Chinese Goldilocks economy — not too hot and not too cold.
We have edged up our GDP growth projection for 2010 to 10 % after the third quarter data. We see growth at 8.7 % in 2011 and easing somewhat further in the medium term. Pushed up by higher food prices, inflation may stay above the 3 % target for a while. It is unlikely to escalate as core inflation remains in check. However, raw commodity prices may rise further while sustained high wage growth is unlikely but cannot be ruled out. Given the fundamental drivers of property prices, they are unlikely to be contained for long.
Consumer price inflation has risen on higher food prices. CPI inflation rose to 3.6 % (yoy) in September (Figure 9). About two-thirds is contributed by higher food prices, largely because of problematic weather domestically but with additional impact from higher international food prices.
Despite renewed increases in international prices for industrial raw materials, input prices in China are still falling month on month and the (yoy) PPI increases are moderating. Meanwhile, core inflation remains low as strong productivity growth in manufacturing has largely offset sizeable wage increases in recent years.
Essentially, they’re blaming much of the recent inflation on weather, and point to successful efforts to control property price appreciation and falling input prices.