China’s economic growth will slow slightly in 2014 but the nation remains the key to the fortunes of the East Asia Pacific region, a new World Bank report says.
Developing East Asia has been a global growth engine since the 2008 global financial crisis and remains the fastest growing region in the world, the World Bank’s East Asia Pacific Economic Update says, with 2014 growth expected to be 7.1 per cent.
China, the region’s biggest economy, will suffer an easing in its growth rate to 7.6 per cent in 2014, down from 7.7 per cent a year earlier, but economic reforms begun by Chinese leaders in late 2013 are expected to deliver sustainable growth in the longer term.
While reforms in China’s financial and services sectors, as well as social policy improvements are expected to cut growth further to 7.5 per cent in 2015, the World Bank has signalled potential benefits for Australia if efforts to move the economy to a more sustainable footing are successful.
“Successful reforms in China could bring considerable benefits to trade partners suppling it with agricultural products, consumption goods and modern services,” the report, released on Monday, says.
“Conversely, spillovers from a disorderly rebalancing in China could hurt regional and global growth, especially in countries relying on natural resource exports.”
The World Bank says that while South East Asian economies generally fared better than expected after the United States began to taper its fiscal stimulus program, structural reforms to maintain growth and boost investor confidence are needed.
The report also warns that adverse changes in the world’s developed economies could affect the region.
“A slower-than-expected recovery in advanced economies, a rise in global interest rates and increased volatility in commodity prices on account of recent geo-political tensions in Eastern Europe serve as reminders that East Asia remains vulnerable to adverse global developments,” World Bank chief economist for East Asia and the Pacific Bert Hofman said.
The report also notes that improving economic conditions in Australia are a positive for Pacific Island nations, which conduct one third of their total trade with Australia and New Zealand.
Australian and New Zealand tourists account for two-thirds of visitors to Fiji, Samoa and Vanuatu.