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Monday 19th of April 2010
March 17, 2010    

World Bank raises China growth forecast

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by Kay Murchie
World Bank raises China growth forecast

The World Bank has raised its GDP forecast for China and urged the Government to let the yuan appreciate to stop the economy overheating.

China‘s economy, which is currently the world’s third largest, has led the way in the global recovery and many have described its recovery as “impressive”.

In a quarterly update on China, the World Bank said gross domestic product would soar 9.5% this year, significantly higher than the Government’s target of around 8% for the 2010 year.

However, the World Bank is calling for China to let its currency appreciate.

Earlier this week, Wen Jiabao, China’s Premier, denied his Government is keeping the yuan undervalued after lawmakers and economists said it is hampering a global recovery.

Mr Wen argued keeping the yuan stable was “an important contribution” to global recovery and said: “We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency.”

US legislators and trade groups say the yuan is kept up to 40% below what its value should be against the US dollar.

The Chinese currency pegged the US dollar until 2005 when it was allowed to rise in value by about one fifth.

The peg was reinstated in July 2008 when the global financial crisis took hold.

However, China is under pressure to allow the yuan to find its own level in order to ease inflation, which reached a 16-month high last month.

Meanwhile, in its report, the World Bank said: “Strengthening the exchange rate can help reduce inflationary pressures and rebalance the economy”.

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