World Bank President: China'S Growth Model Is Not Sustainable

According to the financial times, Zoelick, the world bank president, said recently that China is well aware of its current situation.

The following is the abstract:

Global economic leaders must adjust their way of thinking and their own economies.

Fiscal and monetary policies have always been dominant.

There is some truth: the decision on deficits, debt and the euro zone this autumn will probably determine whether the global economy is going further into a more dangerous situation or will begin a long recovery.

But these policies are not enough to achieve sustained growth: we must take actions against structural problems to create jobs, increase productivity and achieve sustainable long-term rebalancing.

China's current situation is as important as Europe, Japan and the United States.

During the crisis, China's growth has always been a source of strength, but Chinese leaders understand that their growth pattern is unsustainable.

Over the past 30 years, China's economy has grown by an average of about 10% per year.

In 1990, China's per capita income was 30% lower than that in sub Saharan Africa. Today, its per capita income has increased 3 times, exceeding 4000 US dollars.

By 2030, if China's per capita income can reach US $16 thousand (which is likely to be realized), the impact on the world economy will be equivalent to an increase of 15 of the current South Korea.

It is hard to imagine how such growth will be realized in the export and investment driven growth mode. Therefore, China must promote domestic demand, reduce savings level and increase consumption so as to achieve economic rebalancing.

If there is no fundamental structural change, China may fall into "medium".

China's policymakers are very clear about what they must do.

The 12th Five-Year plan pointed out the direction.

At the moment, their challenge is "how" to do it.

China's State Council Development Research Center (DRC), the Ministry of Finance and the world bank are working together to study how to turn "what" into "how" and will complete a report later this year.

The starting point of our research is that China will develop into a high-income country in 2030, and be able to protect its environment and natural resources, encourage inventions and create responsibilities in the global economy.

Last weekend, a group of high-level Chinese and international experts gathered in Beijing to discuss the feasibility.

A key question is how China can pform its market economy.

A broad agenda should include redefining the role of the government and the rule of law, expanding the private sector, promoting competition and deepening reform in land, labor and financial markets.

In order to release human potential, China must speed up its opening up and innovation so as to encourage Chinese enterprises to invent new products and procedures through competition, not only by China's independent research and development, but also from the global network.

China can achieve "green growth" by combining market incentives, regulation, public and private investment, standards and system development.

China also intends to ensure equal opportunities and social security for all citizens.

To this end, it must consider how best to provide more and better public services, to ensure that the social security system is effective and to mobilize private and public sectors to shoulder the responsibility of providing funds, implementation and supervision for social services.

China will consider how to enhance its financial system - mobilizing all public resources within the budget, and linking these resources to all levels of government expenditure.

But if we can not mobilize additional resources from state-owned enterprises and other fields, it will be difficult for China to push ahead with reform.

We will also discuss how China should shoulder its global responsibilities.

Now, China is already an important stakeholder in the international system, but it is still quite cautious.

In the future, Chinese leaders should be a key player in the global solution.

Even in response to the immediate economic turmoil, global leaders must also plan for future growth engines.

This agenda will also establish market confidence and play a positive role in the current economic situation.

China's efforts to find a sustainable development model will be conducive to the stability of other developing countries, regions and the world as well as the international economy.

China is preparing to meet all challenges.

The developed countries should also take precautions against their structural growth challenges.