WB raises China growth forecast to 10.4%

BEIJING: The World Bank on Tuesday raised its 2006 growth forecast for China's sizzling economy to 10.4 percent from 9.5 percent, saying the outlook was positive though high investment levels posed risks.

In its latest quarterly update on China, the Washington-based group also revised its projections for growth in 2007 to 9.3 percent from 8.5 percent. "The outlook for China's economy remains favorable," it said.

"With production capacity continuing to expand in line with demand, low inflation and the current account in surplus, the main policy concern is not general overheating. Policymakers are worried that high investment could cause overcapacity in specific sectors and may affect the banks because loans may turn bad in the future."

Amid serious concerns in Beijing that fixed assets investment levels of nearly 31 percent in the second quarter remain too high, the bank said investment coming from profits and not bank credit was a good thing.

"The authorities can take some comfort from the fact that most investment is financed from profits rather than credit and that the highest investment growth is taking place in largely commercialized sectors," it said.