China needs change to grow
February 27, 2012
Three decades after China cautiously allowed free market enterprise, private entrepreneurs have become world leaders in export-driven manufacturing, while state companies still control most domestic industries like steel, oil and telecommunications, the World Bank stated in a report published Monday.
This growth model was "unsustainable", World Bank president Robert Zoellick said at a news conference in Beijing.
He added that the Chinese economy was at a "turning point" and needed to "redefine the role of the state" if it wanted to avoid crisis and to keep growing.
The report - forecasting developments until 2030 - recommends a series of controversial reforms.
They include forcing state companies to compete with private rivals, basing bank lending on market forces, and changing a household registration system that limits the free movement of rural migrant workers.
Zoellick said the reforms might "face opposition" from those who benefited from the old system, which is why he urged Chinese leaders to make changes "gradually to build support from those who stand to profit from them."
Slowing growth
A major point of criticism is that most low-cost credit from government banks goes to state companies, while private businesses – which create most of the jobs and much of China's wealth – are lacking state support.
The report cited Beijing's 2008 economic stimulus as an example, which poured huge sums into state industries while thousands of private companies went bankrupt.
The World Bank researchers expect China's rapid growth to slow from an average of 9 percent annually to about 5 to 6 percent by 2015.
"There will be many risks and challenges going forward," said Vikram Nehru, one of the reports lead authors, citing an aging population, competition for natural resources and environmental degradation.
"Managing the smooth slowdown to a sustainable path in the medium-term will be challenging, and a key risk could be if growth suddenly slows," he added.
World Bank president Robert Zoellick said the report was endorsed by President Hu Jintao and Vice President Xi Jinping, and discussed with a wide range of Chinese officials to "help win support for its recommendations."
"What I'm picking up from discussions, is a recognition that it is better to undertake structural reforms while the economy is growing," he added.
uh / slk (dpa, AP)