World Bank slashed its Growth Forecast for China's Economy to 7.7 Percent

The World Bank on 14 June 2013 slashed its growth forecast for China's economy for 2013 to 7.7 percent from 8.4 percent. In its report, the World Bank stated that the main risk related to China remains the possibility that high investment rates prove unsustainable, provoking a disorderly unwinding and sharp economic slowdown. The projection is lower than the 7.8 percent expansion the country recorded in 2012, which was its weakest in 13 years.

The report also stated that the Chinese household debt is around two to three times higher than the level before 1997, when the Asian Financial Crisis hit. It added that, while the headline inflation rate is mild, price pressures remain in certain rapidly growing segments of the economy, including real estate.In April 2013, China announced unexpectedly weak growth of 7.7 per cent for the first quarter, surprising analysts who had expected expansion to accelerate in 2013, after showing strength at the end of 2012.

Other recent indicators have raised alarm bells, with exports showing almost no growth in May 2013, while industrial output expanded at a slightly slower pace than April 2013 and big ticket investment growth also eased. The World Bank's forecast cuts followed a recent lowering by the International Monetary Fund to 7.75 per cent from the previous 8.0 per cent.