World Bank Warns That China's Economic Model Is Unsustainable

According to the World Bank and researchers associated with the Chinese government, China is at a turning point in its development path and its current growth model is unsustainable. World Bank President Robert B. Zoellick gave opening remarks on Monday as he announced the findings of the “China 2030 Report”. Zoellick said that industrialized nations had a major stake in China's ongoing economic development because developing economies provided two thirds of the world's economic growth over the past five years. Zoellick commended China for achieving a 9.9 percent average growth rate over the past 32 years, which lifted more than 600 million people out of poverty, but warned that China could no longer count on its current development model for continued economic growth. As developing economies like China compensated for the poor economic performance of developed nations, Zoellick said that it was important that China addressed a growing number of challenges to its economic growth, which include an aging population, pressure on global resources, environmental dangers and rising social inequality. Zoellick praised Chinese leaders for their record of solving problems and said that the Chinese leadership recognized the need for structural reform and was asking the right questions. He said that they had passed the point of asking what needed to be done in order to continue China's economic development and were moving on to addressing how it should be done. Zoellick said that one of the most important tasks facing China is a need to "redefine the roles of the state and the private sector, so that China can complete its transition to a market economy." The World Bank President went on to say that "China relies on a mix of market and nonmarket measures to shape incentives for producers and consumers, and there is a lack of clarity in distinguishing the roles of government, state enterprise, and the private sector. China needs to resolve these issues" Zoellick also stressed the importance of China putting greater emphasis on the the enforcement of intellectual property rights, so that the country could link to international research and development networks and contribute to global innovation. Promoting greater economic equality was also mentioned as an important step in China transitioning from a middle income to a high-income country. The “China 2030 Report” said that " social policy will need to focus on establishing a welfare system appropriate for China in 2030—one that promotes human capital development, provides basic social welfare but avoids welfare dependency, and creates social conditions supportive of growth and development. Its foundation should be a basic level of security provided to all, with a particular focus on the poor." The report also noted that improving the Chinese government's financial health would be an important part of any economic growth plan, saying that "a key challenge is to further strengthen China's fiscal system, improve fiscal sustainability, and align it with the evolving role of government to support the delivery of a large economic, social, and environmental agenda by 2030." At a time of rising tensions between China and many of its neighbors because of a number of territorial disputes, the report also stressed the importance of China " achieving mutually beneficial relations with the rest of world." According to the World Bank, as China becomes more interdependent with the rest of the world, "China's strategy toward the world will need to be governed by a few key principles: open markets, fairness and equity, mutually beneficial cooperation, global inclusiveness, and sustainable development." World Bank President Robert B. Zoellick said that the economic development strategy put forth in the World Bank's report builds on China's strengths, while benefiting from international opportunities. If the new plan for Chinese economic development is successful, then the Chinese economy could continue to fuel world economic growth for the next two decades.