In its China Quarterly Update issued on Thursday, the World Bank raised its forecast for China's 2009 GDP growth rate to 7.2%, as compared with the 6.5% forecast made in March.  In its overview, the World Bank says that even though China’s economy has continued to feel the brunt of the global crisis, China's very expansionary fiscal and monetary policies have kept the economy growing respectably.  The global growth prospects remain subdued even as signs of stabilization have emerged, but growth in China should remain respectable this year and next, although it is too early to say a robust sustained recovery is on the way, and China can have the confidence to emphasize forward looking policies and structural reforms.

Even though there are many positive signs for China's turnaround, the World Bank cautions that it is too early to say that there is a sustained recovery in China.  "In our view, overall growth prospects for 2009 have improved somewhat, compared to 3 months ago, but with little carry-over into 2010",  the World Bank says.  Recently, government-influenced investment has soared, and the stimulus has supported some market-based sectors, but overall, market based investment lags significantly.  Housing sales have recovered in early 2009, but new real estate activity remained subdued so far.

The World Bank forecast is still lower compared with others.  After China's Q1 GDP release, Goldman and the Chinese Academy of Social Sciences both projected China's GDP growth this year to be 8.3%.  On May 17, a government officer also said 8% of growth rate was achievable.

Boosted by the World Bank forecast and the State Council assessment of China's current economic situation, Chinese shares rose to their highest level since July 2008 on Thursday, with the Shanghai Composite Index gained 1.56%, and the Shenzhen Component Index advanced 1.01%.