By Fu Jing (China Daily)
Updated: 2007-09-13 07:55

The World Bank Wednesday said China has the capacity to absorb the impact of the recent international financial market turmoil if it spreads to its robust economy.

It also said China has not been affected by the global financial problem triggered by the subprime mortgage crisis in the United States though some of the emerging markets have already been reeling from a credit squeeze.

"The recent international financial market turmoil may affect China's economy, but China is well placed to absorb the impact," said Louis Kuijs, senior economist for World Bank's China office.

He based his judgment on the fact that economic growth in China remains rapid and the trade surplus continues to widen, while the pattern of growth remains unchanged.

"Even if the financial crisis brings about a global economic slowdown, it will help China to adjust its pace of economic development."

The country's leadership is concerned about fast-growing investment, ballooning trade surplus and threat of inflation. The World Bank feels a moderate global slowdown would actually mitigate concerns of policymakers on overall growth, inflation, and trade surplus.

The World Bank projected a 11.3 percent economic growth for China this year and below 11 percent the next. It said the country's strong macroeconomic position provides room to adjust the domestic policy stance, if necessary, to maintain high growth.

The report said there are no indications that cost pressures are reducing the competitiveness of Chinese exports despite the overall price level of China's exports to the US having increased by 1 percent compared with the average of the previous years.

"The price rise was mainly caused by raw material cost increase," said Kuijs.

The World Bank said the country's domestic economic climate remains buoyant, with profit and credit growth being high, investment remaining strong and consumption becoming more robust.

Though inflation has risen, it's largely because of higher food prices, it said.