The World Bank maintains China's GDP growth forecast in 2023, but lowers the outlook for 2024.

world Bank maintained its forecast for China's economic growth in 2023 at 5,1% in line with earlier estimates in April, but lowered its forecast for 2024 from 4,8% to 4,4%, citing the sector's continued weakness real estate.

For East Asia and the Pacific, including China, the bank slightly lowered its gross domestic product growth forecast for 2023 to 5,0% from a previous estimate of 5,1%, the World Bank said in its semi-annual regional update.

Reduction of forecasts for 2024

The bank lowered its 2024 regional forecast to 4,5% growth from 4,8%, weighed by external factors including a slowing global economy, high interest rates and trade protectionism.

“Almost 2022 new restrictions were imposed on global trade in 3000, three times as many as in 2019.” – reported the World Bank.

For China, the rebound as it reopened its economy after three years of extremely stringent zero-COVID-19 policies has weakened, with elevated debt and weakness in its real estate sector weighing on growth, the World Bank said in a report.

After months of mostly bleak data, the world's second-largest economy has started to show signs of stabilization.

Factory activity in China increased in September for the first time in six months, an official survey showed. The first signs of improvement appeared in August, when industrial production and retail sales accelerated, while declines in exports and imports were limited and deflationary pressures eased. Industrial company profits surged by a surprise 17,2% in August, reversing July's 6,7% decline.

At this point, it appears that more policy support will be needed for China's economy to achieve the government's growth target of around 5% this year. Stronger structural reforms, including further liberalization of the residence permit system "hukou", stronger social safety nets and greater regulatory predictability for investment in innovative and green products could help revive consumption and investment, creating the basis for sustainable growth, the World Bank said.

China's economic sluggishness has polarized government advisers over the best solutions. The pro-reform camp is banging the drum for faster structural reforms, including relaxing the hukou system (referring to permanent residence permits based on legally required household registration) to boost consumption and remove barriers to market entry for private companies at the expense of state-owned giants.