China’s ‘soft landing,’ as predicted by the World Bank

After a superheated rise, China’s economy is starting to slow. Luckily, according to the World Bank, the Asian superpower is headed for a “soft landing” instead of a crash that could overwhelm the multitude of countries with which China now does business.

The bank, in its quarterly report on the country, forecasts 8.2% GDP growth for China this year and 8.6% expansion in 2013. The numbers signal a more “gradual slowdown” than the nation’s recent tumble from 10.4% growth in 2010 to 9.2% last year.

“The risks of overheating are moderating, increasing the prospects to achieve a soft landing,” said Ardo Hansson, the bank’s lead China economist, in a statement. He added, however, that “there are concerns that growth slows too quickly.”

Here’s what’s coming for China: Investment activity and domestic consumption will both grow, but at slower levels than before. Sluggishness in the Eurozone and in the U.S. has dampened demand for Chinese exports, which grew 9.3% last year after soaring 28.4% in 2010, the World Trade Organization said Thursday.

Tighter policies from the Chinese government have caused a correction in the real estate market at home. The country’s rapid urbanization and industrialization will mellow out while the labor force begins to shrink. Uncertainty reigns in advance of the Communist Party’s October congress, where the country’s leadership structure will be upended.

But the “cyclical weakness in the near term” is actually healthy for the world’s second-largest economy, the World Bank says – as long as it doesn’t deepen into a long-term holding pattern.

To keep China on “a more sustainable growth path” without slipping into a slump, the bank recommends that the government consider targeted tax cuts, social welfare spending, efforts to ease credit availability and measures to improve environmentalism

And as Chinese technology begins to edge closer to developed-world quality and prices, re-balancing the economy is expected to bring “slower, though higher-quality, headline growth.”

The World Bank offers financial assistance to developing countries.

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