To complete its full transition to a market economy, World Bank chief Robert Zoellick warns that China needs to undergo reforms, especially in its private sector, to achieve its goal of a new economic growth structure.
While Zoellick does not expect a sudden ‘big bang’ reform, he noted that in the history of Chinese economic reform post Deng Xiaopeng, there has been a strong tendency for gradual reform, with tests first carried out on a local scale before they are implemented nationwide.
A report called ‘China 2030: Building a Modern, Harmonious, and Creative High-Income Society’ jointly issued by the World Bank and Chinese government think tank, the Development Research Center, warned that China could lurch into economic and social crisis if reforms are not made.
China’s growth outlook from 2011 to 2030 is an annual rate of 6.6 percent, significantly slower than the 10 percent average annual growth China has managed for the last 30 years.
To which, Zoellick said:
China’s leaders have recognized that the country’s growth model, which has been so successful for the past 30 years, will need to be changed to accommodate new challenges.
Referring to the risk of a hard landing, as well as challenges posed by an ageing and shrinking workforce, rising inequality, environmental stresses and external imbalances, Zoellick added:
The case for reform is compelling because China has now reached a turning point in its development path. Managing the transition from a middle income to a high-income country will prove challenging; add to this a global environment that will likely remain uncertain and volatile for the foreseeable future and the need for change assumes even greater importance.
Still, Zoellick remains confident over China’s ‘progress towards becoming a responsible stakeholder in the international community.’
Of the recommendations laid out by the World Bank report, structural reforms to China’s economy took central stage.
Central to the report’s findings is the need for China to modernize its domestic financial base and move to a public financial system-- at all levels of government -- that’s transparent and accountable, overseen by fewer but stronger institutions, to help fund a changing economic, environmental, and social agenda. The reform agenda, with a stronger and more flexible financial sector, the promotion of innovation, and green growth as drivers of development, can lead to opportunities for creating new jobs and additional productivity within China as well as new opportunities for foreign firms.