DAVOS, Switzerland Jan 28 China's economy will probably grow by between 7 and 8 percent this year, as the government's fiscal stimulus policies take hold, the World Bank's chief economist said on Wednesday. The world's third-largest economy will probably grow by 6 to 7 percent in the first quarter from a year earlier and average 7 percent in the remaining quarters, Justin Lin told Reuters on the sidelines of the annual meeting of the World Economic Forum.
China, the region's second-biggest economy and the world's third-largest, has slowed much more abruptly than analysts had expected, as exports have gone from double-digit growth to shrinking from their year-earlier levels in the course of months.
Annual economic growth slowed to 6.8 percent in the fourth quarter of 2008, from 13 percent in all of 2007. The 9 percent pace for 2008 was the slowest in seven years.
"The Chinese government has been very responsive to this pressure, so I think the 4 trillion yuan ($585 billion) fiscal stimulus will show an effect by the second quarter of this year," Lin said.
Lin also said he thought it was unlikely that a recent volley of comments between the United States and China on the yuan CNY=CFXS would blow up into a trade war.
U.S. Treasury Secretary Timothy Geithner said last week that Beijing was manipulating its currency to gain an unfair trade advantage, comments that have been rebuked by China's central bank and diplomats.
"Both sides have the understanding it's very important to look forward and to solve the financial crisis, and that at this time it's more important to stimulate economic growth," Lin said.
"I think it's unlikely to (lead to) a trade war, and we hope that at this stage the most important thing is to prevent protectionism in the world. That will be the main direction of effort, I'm sure, on the U.S. and the Chinese side."
For full coverage, blogs and TV from Davos go to www.reuters.com/davos (Reporting by Jason Subler; Editing by Richard Hubbard)