The World Bank has cut its prediction for China's economic growth in 2009 to 6.5% from 7.5%, saying it could not "escape the impact of global weakness".
The World Bank has cut its prediction for China's economic growth in 2009 to 6.5% from 7.5%, saying it could not "escape the impact of global weakness".
Falling demand for Chinese goods abroad - which the bank said could cost up to 25 million jobs - is the main reason for the projected slowdown.
Falling demand for Chinese goods abroad - which the bank said could cost up to 25 million jobs - is the main reason for the projected slowdown.
The growth forecast is well below the minimum of 8% that many analysts argue is required to keep China stable.
The growth forecast is well below the minimum of 8% that many analysts argue is required to keep China stable.
Beijing has spoken of a threat of social unrest if the economy stalls.
Beijing has spoken of a threat of social unrest if the economy stalls.
Exports exposure
Exports exposure
China is heavily dependent on the global economy which buys its imports. But as recession grips the US and Europe - among its largest customers - demand has fallen, resulting in factories closing and millions of people losing their jobs.
China is heavily dependent on the global economy which buys its imports. But as recession grips the US and Europe - among its largest customers - demand has fallen, resulting in factories closing and millions of people losing their jobs.
"As the global crisis has intensified, China's exports have been hit badly, affecting market-based investment and sentiment, notably in the manufacturing sector," the World Bank said.
"As the global crisis has intensified, China's exports have been hit badly, affecting market-based investment and sentiment, notably in the manufacturing sector," the World Bank said.
The bank also warned Beijing that it would be thwarting its own medium-term goals if it tried to offset the slowdown by further boosting investment.
The bank also warned Beijing that it would be thwarting its own medium-term goals if it tried to offset the slowdown by further boosting investment.
It said China's fundamentals remained strong, but warned against focusing too much on capital-intensive projects.The global economic downturn is hitting China's growth
It said China's fundamentals remained strong, but warned against focusing too much on capital-intensive projects.The global economic downturn is hitting China's growth
"The fundamentals for China are strong enough to ride out this storm, and it may be just as appropriate to shift the focus as much as possible to the medium and long-term challenges instead of a very narrow focus on short-term growth objectives," said Louis Kuijs, the senior economist in the bank's Beijing office.
"The fundamentals for China are strong enough to ride out this storm, and it may be just as appropriate to shift the focus as much as possible to the medium and long-term challenges instead of a very narrow focus on short-term growth objectives," said Louis Kuijs, the senior economist in the bank's Beijing office.
Mr Kuijs described the outlook for exports this year as "grim" and "sombre".
Mr Kuijs described the outlook for exports this year as "grim" and "sombre".
But he said weakening the currency in the short term would not help to revive exports, because global demand was so weak, and the move would slow China's switch to consumption-led growth.
But he said weakening the currency in the short term would not help to revive exports, because global demand was so weak, and the move would slow China's switch to consumption-led growth.
Party worries
Party worries
The drop in trade will hurt investment and job creation, the bank said.
The drop in trade will hurt investment and job creation, the bank said.
It expects between 16 million and 17 million non-farm jobs to disappear this year, but said the key to avoiding instability was an effective social welfare system. China's economy cannot escape the impact of the global weakness World Bank
It expects between 16 million and 17 million non-farm jobs to disappear this year, but said the key to avoiding instability was an effective social welfare system. China's economy cannot escape the impact of the global weakness World Bank
"Somewhat lower overall growth is not likely to jeopardise China's economy or social stability, especially if the adverse consequences of dislocation and layoffs are alleviated by using and expanding the social safety net," the report said.
"Somewhat lower overall growth is not likely to jeopardise China's economy or social stability, especially if the adverse consequences of dislocation and layoffs are alleviated by using and expanding the social safety net," the report said.
China's communist rulers have said they are prepared to offer more stimulus spending in order to achieve the 8% growth target.
China's communist rulers have said they are prepared to offer more stimulus spending in order to achieve the 8% growth target.
But the bank said this may not be the right approach and the government should nurture reserves in case growth falls further.
But the bank said this may not be the right approach and the government should nurture reserves in case growth falls further.
"China's economy cannot escape the impact of the global weakness," the report said.
"China's economy cannot escape the impact of the global weakness," the report said.
"Government-influenced activity makes up a modest share of the total: it cannot and should not offset fully the downward pressures on market-based activity."
"Government-influenced activity makes up a modest share of the total: it cannot and should not offset fully the downward pressures on market-based activity."
However, China would still do better than other economies, and its stimulus plans were beginning to inspire confidence, the bank said.
However, China would still do better than other economies, and its stimulus plans were beginning to inspire confidence, the bank said.
According to the latest World Bank global forecasts, published in December, the world economy is set to expand at a weak annual rate of 0.9% in 2009, with a 0.1% contraction in developed economies offset by growth in developing countries of 4.5%.
According to the latest World Bank global forecasts, published in December, the world economy is set to expand at a weak annual rate of 0.9% in 2009, with a 0.1% contraction in developed economies offset by growth in developing countries of 4.5%.
A Chinese government think tank this month forecast first-quarter growth would slow to 6.5%, from a 6.8% pace in the fourth quarter last year.
A Chinese government think tank this month forecast first-quarter growth would slow to 6.5%, from a 6.8% pace in the fourth quarter last year.
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