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World Bank Raises China Growth Forecast

According to The World Bank's latest quarterly report, China will again enjoy robust growth this year.

But Beijing will need to adopt tighter monetary policies if it is to keep inflation in check and prevent unsustainable prices in the booming real estate sector.

World Bank analyst Louis Kuijs says, despite a fall in early 2009, China's exports bounced back, later in the year, and spurred 8.7 percent growth in gross domestic product.

He says similar robust growth, so far this year, has led the World Bank to revise China's 2010 GDP forecast from 9 percent to 9.5 percent.

"China's economy has held up very well during the global crisis and the growth prospects for this year and next year remain quite good," said Kuijs.

Inflation is Beijing's biggest concern.

Premier Wen Jiabao said Sunday it would be a key challenge this year.

However, although the World Bank says inflation will be "significant," it also believes it will not enter an uncontrolled spiral.

The World Bank's chief economist for China, Ardo Hansson, says other economic risks exist - including the end of the government's huge stimulus package to fund large infrastructure projects.

These have helped stave off mass unemployment.

The report recommends Beijing tighten lending to provincial governments and make better use of lowering and raising interest rates to keep the economy buoyant.

But both Kuijs and Hansson refuse to speculate on the affects of a possible American ruling - perhaps next month - that China is manipulating its currency to give Chinese businesses an unfair trade advantage.

The World Bank says it does not follow exchange rates and says the issue is a domestic matter for Washington.
The Chinese have accused the United States of politicizing Beijing's exchange rate policy. It denies deliberately undervaluing its currency.