World Bank: East Asia faces new risks a decade after 1997 crisis

BEIJING (AP): China and other East Asian economies could see growth derailed if they fail to manage strains from uneven growth, pollution and swollen trade surpluses a decade after the region's 1997 financial crisis, the World Bank said Thursday.

East Asia's developing countries are richer and have a bigger share of the world economy than in 1997, when a crisis sparked by a plunge in the Thai baht dragged the region into recession, thebank said in a report.

Before the crisis, half the people in the region lived on less than US$2 (euro1.50) a day. Now, that rate has receded to 29 percent, it said.

But many countries suffer from weak investment and a growing rich-poor gap, the report said. It also said China, South Korea, Indonesia and other countries are struggling to manage hugeinflows of money from multibillion-dollar trade surpluses.

"Even as the region celebrates recovery, new challenges loom, which could slow or even derail growth if not properly handled," the bank said in the report, "East Asia and Pacific Update."

China is expected to keep up growth this year of about 10 percent, but faces strains from record trade surpluses, a widening wealth gap and rising pollution, the bank said. It noted that China has 20 of the world's 30 most polluted cities.

Such problems "could affect China's onward development if left unchecked," the report said.

Other economies face wrenching changes due to Chinese competition in manufacturing, the report said.

China's emergence is "creating intense competitive pressures for other East Asian economies," the Washington-based bank said. It said companies rate uncertainty due to the changing conditionsas their biggest constraint on operations.

As a whole, East Asian economies last year recorded their strongest growth since the 1997-98 crisis, expanding at 8.1 percent.

This year, the bank said growth in the region - stretching from South Korea to Indonesia - should slow modestly to 7.3 percent because of the looming downturn in the U.S. economy and slowing export growth. (**)
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