W.Bank sees slower China growth, higher inflation

The World Bank cut its forecast on Monday for China's gross domestic product growth in 2008 to 9.6 percent from 10.8 percent and said it now expects consumer prices to rise 4.6 percent this year, up from 3.8 percent projected in September.

The bank said the economic risks facing China are larger than usual, especially on the downside, because of current uncertainty about the global outlook, while the risks for inflation may be on the upside.

But in a quarterly economic update the bank's Beijing economists said China was well placed to stimulate demand in the event of a deeper-than-expected world downturn by easing fiscal policy and/or credit controls.

"Inflation concerns make lowering interest rates or relaxing liquidity management less obvious. Uncertainties in the outlook call for vigilance and flexibility," the report said.

The bank expects China's current account surplus to fall to 9.3 percent of GDP this year from an estimated 11.0 percent in 2007. Import growth has considerably outpaced export growth recently, the bank noted.

"We may be closer to a moderation in the growth of China's trade surplus," senior economist Louis Kuijs told a news conference.