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The bank's sibling agency, the International Monetary Fund, warned in February that China's forecast growth this year could be cut by nearly half if Europe, its biggest trading partner, fails to resolve its government debt problems and suffers a sharp setback. Chinese leaders responded to last year's plunge in global demand by promising to ease lending controls and help struggling exporters. They said lending curbs aimed at cooling home prices would stay in place. The bank said China faces risks if developed countries that are its key export customers suffer a deeper downturn or if its own real estate market declines further. "If something in the world were to go much worse than expected, than that obviously would have an impact on China," said Hansson. Real estate is an important pillar of China's economy, but communist leaders say despite pain for developers, controls aimed at cooling prices will remain in effect until housing costs decline further, though they have given no target. Next year, growth should rebound to 8.6 percent, the World Bank said.
Longer-term, it said China's outlook depends on the government's ability to manage the shift to more self-sustaining domestic consumption. It said gains from industrialization and the migration of workers to cities will diminish while the labor force is forecast to shrink, increasing the number of retirees supported by each working person. "The welcome efforts to rebalance the economy are expected to not only alter the pattern of growth, but also bring slower, though higher-quality, headline growth," the bank said. In a report in February, the bank and a Chinese Cabinet think tank said Beijing needs to adopt a new economic strategy if it wants to avoid a sharp downturn and achieve its goal of creating a high-income society. Communist leaders need to make the economy more efficient by reducing the dominance of state companies, which still control many industries, and encouraging free markets and private enterprise, the report said. ___ Online: World Bank: http://www.worldbank.org/
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