China growth outlook lowered by World Bank

FXstreet.com (Barcelona) - According to the World Bank's latest East Asia Pacific Economic Update report, China is expected to grow by 7.5% this year, compared with the previous projection of +8.3% and by 7.7% in 2014, down from the April forecast of +8%. The report cited excessive levels of local government debt as the main reasons for the reduction.

The World Bank suggested that the Chinese government's recent loose monetary policy should be curbed and that "clear rules on borrowing, on allowed sources of borrowing, on debt resolution, and on the disclosure of comprehensive financial accounts by local governments" should be established.

It also pointed to the need of increasing financial regulation in the country as "the rapid expansion of shadow banking poses serious challenges, since shadow banking is closely linked to the banking system, is less regulated, and operates with implicit guarantees from banks and local governments."

Furthermore, the report pointed to a general slowdown in growth experienced by the majority of developing East Asian countries, such as Indonesia, Malaysia or Thailand, connected with a drop in global commodity prices, lower investment and a deceleration of export growth.