2nd LD-Writethru-China Focus: Chinese economy "the envy of the world": WBG chief

Visiting World Bank Group (WBG) President Jim Yong Kim Friday commended China's reform resolve and global leadership in development, noting that the WBG is exploring co-financing options with the newly-established Asian Infrastructure Investment Bank (AIIB).

ENVY OF THE WORLD

"China has built the world's second largest economy and it has undertaken significant reforms aimed at providing all of its citizens with an opportunity to enjoy greater prosperity," the WBG chief said at a press conference in Beijing.

While China's growth has gradually slowed since 2012--what President Xi Jinping has called the "new normal"--the nation remains "the largest contributor to world growth since the global financial crisis" with roughly 30 percent of global growth over the last couple of years coming from China alone, he told reporters.

China's growth slowed to 7.4 percent last year and the WBG predicts about 7-percent for 2015, which is still "the envy of the world," he said.The press conference came two days after China released its Q2 economic growth figure which stood at 7 percent.

Despite recent stock market fluctuations, "China's economy is strong and its fundamentals are sound," he said at the end of his visit, during which he met with Premier Li Keqiang and other top policymakers.

Commenting on recent equity market volatility, Kim described China's stock market as "relatively young" and said that all over the world, governments often take measures to reduce volatility in the markets.

China's stock market was among the world's best performers earlier this year, with the Shanghai Composite Index (SCI) up more than 150 percent in 12 months, partly fueled by margin trading. However, the SCI recently lost more than 30 percent in less than a month, as margin traders unwound positions and some investors cashed out.

The market has shown signs of recovery, coming at the same time as some significant changes, including major brokerages putting their own capital into the market and rule changes to allow pension funds to own stocks. It seems unlikely that the market correction will have a huge impact on the real economy and derail China's reform agenda, and Kim stressed that China is determined to continue with reform and transform its growth model.

Chinese leaders are firm that economic and social reforms will ensure "more efficient, equitable, and environmentally sustainable" growth, he said.

During his meeting with Kim Thursday, Premier Li Keqiang also said, "We are well positioned and capable of coping with various challenges, stabilizing market expectations and maintaining sound economic development."

China has lifted more than 600 million people out of poverty in the last 25 years, more than the rest of the world combined during that time. Citing a 50 million U.S. dollar trust fund China has agreed to establish with WBG to finance poverty eradication, Kim noted: "Today, there's no question that China is increasing its role in development around the world."

When it begins operating later this year, the fund will finance operations, research and human resource cooperation at both global and regional levels.

WBG-AIIB PARTNERSHIP

While in China this week, Kim also met Jin Liqun, secretary-general of the AIIB interim secretariat, to discuss how the new bank can hit the ground running. The AIIB took a key step forward last month when founder members agreed on a framework and management structure.

More funding for infrastructure will ultimately help the poor, said Kim. "We agreed with secretary-general Jin Liqun and the interim secretariat to explore co-financing options in the coming months. We plan to hold a meeting later this year in Washington D.C. to talk about specific projects in which we would be co-investors," he said.

"We regularly enter into such arrangements with multilateral development banks because it broadens the pool of financing available for a range of infrastructure projects -- bridges, water treatment plants, roads, and telecommunications, to name just a few.

"With strong environmental, labor and procurement standards, the AIIB will join us and other development banks in addressing huge infrastructure needs that are critical to ending poverty, reducing inequality and boosting shared prosperity," Kim added.

WBG data shows emerging markets and low-income countries facing an annual shortfall of one trillion to 1.5 trillion U.S. dollars in infrastructure spending.

"We need new investors in infrastructure and we think the AIIB will be an important partner," Kim said. Endi