REPORT: CHINA ECONOMY ON MEND

China’s economy is showing “early signs” of stabilizing as government-backed investment counters a slump in exports, the World Bank says.

The lender cut its forecast for the nation’s economic growth this year to 6.5 percent in a quarterly report released in Beijing yesterday. Its estimate was 7.5 percent in November.

China is weathering the global slowdown better than many nations because its banks were largely unscathed by the financial crisis and the government quickly implemented a 4 trillion yuan ($585 billion) stimulus plan, the lender said. Government-influenced investment will surge 26 percent this year and contribute three-quarters of the economic expansion, it said.

“The government’s stimulus is working,” said Louis Kuijs, a senior economist at the World Bank in Beijing. “China’s fundamentals are strong enough to ride out this storm.”

Premier Wen Jiabao said last week that the nation’s 8 percent growth target was “difficult but possible,” adding that the government could add stimulus measures at any time. The spending plan through 2010 includes roads, power grids, pipelines and low-cost housing.

A “substantial part” of China’s surging lending in the first two months of this year was money for infrastructure projects, the World Bank said. Private-sector investment will retreat in 2009 after contributing the bulk of fixed-asset spending in the past two years, leaving the government the key role, it said.