China reforms needed to sustain growth, says World Bank

A worker at a factory in China The Chinese economy slowed in the final three months of last year

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China needs to embrace fundamental free-market reforms if its economy is to continue to grow at the "impressive" pace of the past three decades, the World Bank has said.

The country had reached a "turning point" and needed to reform a growth model that was "unsustainable".

The role of government and state enterprises needed redefining, it said.

But even if growth slows, China was likely to become the world's largest economy before 2030, the bank added.

'Muddling through'

In a report, the World Bank said the Chinese economy had grown on average by 10% a year for the past 30 years to become the world's largest exporter and manufacturer and its second-largest economy.

But it said such growth could not be sustained without far-reaching reforms.

"The case for reform is compelling because China has now reached a turning point in its development path," said the bank's president, Robert Zoellick, at the launch of the report in Beijing.

"The country's growth model is unsustainable. This is not the time just for muddling through - it's time to get ahead of events and to adapt to major changes in the world and national economies," he added.

The bank said there were six important messages that emerged from its research.

  • Enact structural reforms to promote a market-based economy. This could be achieved by redefining the role of government, reforming state enterprises, developing the private sector and promoting competition
  • Quicken the pace of innovation, both internally and by participating in global research projects
  • Encourage investment in green projects and increase efficiency of resource use
  • Promote social security for all
  • Strengthen the fiscal system by mobilising additional revenues and boosting local government financing
  • Engage more with the global economy.

Recent data suggests the Chinese economy is cooling.

Gross domestic product expanded by 8.9% in the three months to the end of December compared with a year earlier.

That is down from 9.1% in the previous quarter and is the slowest pace in more than two years.

Earlier this month, government figures also showed that demand for Chinese exports fell in January.

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