China is relying on stimulus spending to meet the government’s target of an 8 percent economic expansion this year as trade collapses and the International Monetary Fund predicts the first contraction in the world economy in 60 years. India forecasts 7.1 percent growth for the year to March 31.

“I am optimistic about China,” the economist said, adding that while the government needs to do more to reduce the savings rate and encourage consumption, “clearly they are moving in the right way.”

The global slump is going to be “deep and long,” the economist said.

China’s economy, the world’s third biggest, may be the first to recover as a 4 trillion yuan (US$585 billion) stimulus package takes effect, Zhang Yutai, a senior government researcher, said March 22.

China’s growth slowed from 13 percent in 2007 to 6.8 percent in the fourth quarter of last year.

The nation is weathering the global slowdown better than many others because its banks were largely unscathed by the financial crisis and the government quickly implemented its stimulus plan, the World Bank said in a March 18 report.

Still, it cut its forecast for China’s growth this year to 6.5 percent from a previous estimate of 7.5 percent.

Source: Bloomberg