China can't pull world out of recession, says OECD

Tania Branigan in Beijing
guardian.co.uk, Friday 20 March 2009 13.27 GMT

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The west's leading economic thinktank expects "very negative" growth this year, its head warned today.

However, Angel Gurría, secretary-general of the Organisation for Economic Cooperation and Development, said in Beijing that China's gross domestic product would expand by 6-7% – below last November's forecast of 8%. The World Bank cut its growth forecast for China to 6.5% this week.

Gurría added: "Even positive growth in big emerging economies like India and China is not going to be able to offset the negative growth [elsewhere]."

According to a provisional OECD forecast disclosed yesterday by a Slovenian minister, the Paris-based group expects the eurozone's economy to contract by 4.1% this year. The International Monetary Fund has projected a 3.5% fall.

Gurría said China's "cruising speed" to keep unemployment acceptably low was about 7%, adding that growth had fallen from 13% in 2007. The OECD will release a formal forecast on 31 March.

A new OECD report says the global crisis is hitting China's already impoverished countryside, with migrant workers returning home and household incomes dropping because they are no longer sending wages back.

It argues judicial independence and proper defence of farmers' land rights – a sensitive issue – is needed to improve conditions for rural inhabitants. It also calls for increased investment in education, social security and basic services such as a clean water supply, and greater support for non-agricultural jobs.

"The current recession has put into harsh relief the low level of the social safety nets and the livelihood of migrant workers," warned Gurría.

He told the press conference that protectionism was "rearing its ugly head" because of the economic crisis and would only make matters worse. But he played down China's rejection of Coca-Cola's bid for the country's top juice maker, Huiyuan, this week, saying it acted from concern that the deal would have hurt competition.

He also backed China's appeal for more say in global finance bodies, which it will press at next month's G20 summit in London. "The fact that China has less votes than Belgium tells you [it's needed]," he told reporters.

The 30-member OECD, composed of wealthier nations, is forming closer ties with the emerging economies of China, India, South Africa, Brazil and Indonesia.