Friday October 18, 2019

WORLD BANK REPORTS ON CHINA’S ECONOMIC PROSPECTS

February 29, 2012

On February 27, 2012, the World Bank and China’s Development Research Center (a Chinese think tank) released a report entitled “China 2030” with both predictions about and recommendations for China’s future economic situation. The report called for far-reaching but gradually implemented reforms to the Chinese economy, aimed at promoting a free market system.

World Bank President Robert Zoellick said in his remarks that China is currently at a “turning point” in its development. China’s reforms over the past thirty years have been largely successful in promoting China’s economy. However, the “China 2030” report stresses that if China wishes to truly become a high-income society the government must implement a series of reforms designed to prevent future economic stagnation. The growth rate of the Chinese economy is expected to slow from 9% a year to 5-6% a year by 2015; the reforms outlined in the over 400-page report would help ameliorate the adverse effects of such an economic slowdown.

The report called on China to allow more competition from private companies in key domestic industries, especially energy. Currently, government businesses have far more access to loans than private companies. Because of this, the authors of the report believe that market forces don’t play enough of a role in China’s domestic economy, leading in part to China’s heavy reliance on exports and foreign investments. The “China 2030” report argues that unless China opens its domestic industries to full competition, China’s economy could face a crisis 20 to 30 years from now.

To help prevent the predicted crisis, the report called for social as well as economic reform. In addition to advocating for a free market economy and reforms in the public financial system, the “China 2030” report also called for various social reforms, including the expansion of social welfare, an emphasis on environmental protection, and further protection for farmers’ land rights.

While there is speculation that the report will face serious opposition from the Chinese government, especially from factions who rely on state-run industries for support, there has yet to be a widespread backlash against the report. Both current President Hu Jintao and future President Xi Jinping endorsed the formation of research committees for the report. In addition, on the same day as the report’s release, Vice Premier Li Keqiang met with World Bank President Zoellick in Beijing and pledged to support joint efforts to reform the global economy. In his remarks, Li mainly focused on the global financial crisis and the need for international reform, but he also acknowledged that China is still in the process of reforming and modernizing its domestic economy. He promised that China will adjust its economic structure as needed to safeguard the livelihoods of its citizens, and further pointed out fundamental similarities between the World Bank report and the strategies already outlined in China’s 12th Five Year Plan.

Likewise, the head of China’s Ministry of Finance, Xie Xuren, pointed out that China’s economic growth over the past 30 years was largely driven by various reforms. He predicted that China’s future growth will depend on reform as well. Overall, as Zoellick noted in his remarks on the “China 2030” report, there seems to be a consensus among Chinese leaders that reform is necessary to keep China’s economy moving in the right direction. As China undergoes a leadership transition in 2012, it remains to be seen exactly what shape reforms will take.

 

For further information on the World Bank’s “China 2030″ report, please see the following news sources:

Washington Post –  “World Bank, Chinese researchers say China needs new economic strategy, must reduce state role

Telegraph – “China faces crisis without economic reforms – World Bank

Xinhua – “China vows closer cooperation with WB for global economic governance reform

China Daily – “Reform 2.0

For Chinese commentary on the World Bank report, please see the following news sources:

Xinhua 新华 – 李克强会见世界银行行长佐利克等客人

People’s Daily 人民网 – 世界银行发布报告称2030年中国将成全球最大经济体

 

Sina 新浪– 中国与世行报告聚焦2030年中国愿景

 

Edited and compiled by Shannon Reed.