China faces ‘turning point’

The World Bank published a report Monday saying that China stands at a "turning point" of its development and could face an economic crisis if Beijing fails to push forward with reforms in the next 20 years.

The 468-page document, China 2030: Building a Modern, Harmonious, and Creative High-Income Society, was prepared by the World Bank and the Development Research Center under the State Council.

It pointed out the urgency of changes by giving six broad recommendations: strengthening a market-based economy, fostering innovation, going "green," providing social security for all, improving the fiscal system and seeking mutually beneficial relations with the world.

The report came days before this year's two sessions - gatherings of China's legislature, the National People's Congress, and the political advisory body, the Chinese People's Political Consultative Conference.

The Xinhua News Agency commented that the upcoming two sessions are of "particular significance to China," as they will be held just ahead of the 18th National Congress of the Communist Party of China, which "will bring with it a power transition for the country's new generation of leaders."

China needs to strengthen its private sector, open its markets in order to foster competition and innovation, and ensure equality of opportunity to achieve its goals, the report said, calling on Chinese policymakers to shift from focusing on the amount of growth to focusing on the quality of growth.

"The case for reform is compelling because China has now reached a turning point in its development path," World Bank President Robert Zoellick said in a speech in Beijing Monday for the report's release.

"Chinese 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," Zoellick said.

He added that China has an opportunity to avoid the middle-income trap and promote inclusive growth without further damaging the environment.

The World Bank chief noted the report was meant to give suggestions to Chinese authorities, and ideas it presented need further debate before any implementation.

Ding Yifan, a researcher at the Development Research Center of the State Council, told the Global Times that the government needs to guide the country's reforms.

Possible obstacles to reform could come from "vested interest groups," such as some State-owned enterprises that do not want to lose favorable policies from the government, Ding said, adding that the government needs to change the way it manages the market to fully realize the market-driven economy.

Chi Fulin, director of China Institute for Reform and Development in Hainan Province, told the Global Times that the government also needs to better balance relations among different interest groups.

This year marks the 20th anniversary of former leader Deng Xiaoping's "Southern Tour Speeches," which kicked off China's opening-up and reform.

During a trip to Guangdong Province earlier this month, Premier Wen Jiabao told local officials that China should remain unwavering in its push for further reform and opening-up, or face coming to a dead end.

The People's Daily and Xinhua have also published a number of recent articles calling for reforms.

"The effect of the reforms will depend on authorities' determination since many of the areas demanding changes are closely linked to the government," Ding said.

Other than the World Bank report, a document released by the International Monetary Fund in November urged China to open its financial sector.

On Thursday, the People's Bank of China put forward a policy proposal that outlined a three-phase plan to liberalize investment flows into and out of the country, which would give far greater access to the Chinese stock and bond markets within a decade, the Financial Times (FT) reported.

"By overemphasizing preconditions (to reform), a gradual approach is easily twisted into a negative, immobile approach, leading to delays. Being prudent in opening the capital accounts does not mean waiting forever," the FT quoted Sheng Songcheng, the author of the central bank report, as saying.

Meanwhile, despite warnings of a slowing economy, the World Bank said China is likely to become the world's largest economy before 2030.

Zoellick said he believes China's economy will have a soft landing in the near term, and that the country's per capita income growth will stay on track to reach $16,000 by 2030 from the current $5,000.