China’s economy, which has grown at a breakneck double digit rate for almost three decades now, is on course to slow down and may drop to a growth rate of five per cent in the coming years, the World Bank has said, suggesting structural reforms for the giant.
A report prepared by World Bank in coordination with Chinese experts said China has reached a “turning point” in development but it could still emerge as the world’s largest economy before 2030 if it carried out structural reforms.
Summing up the exhaustive report on the future of the Chinese economy by 2030, Vice-Minister for the Development Research Centre of the Cabinet, Mr Liu Shijin, said China’s economic growth rate will decrease to five to six per cent by 2035.
It represents “quite a marginal decrease for China at the current stage, which is already at a high stage of growth rate compared to any country in the world,” he told a high-level conference here where the report titled ‘Development for modern, harmonious and creative society: International Experiences and China’s strategic choices’ was released.
The conference was attended, among others, by top Chinese Ministers, World Bank President, Mr Robert B. Zoellick, and Mr B. K. Chaturvedi, Member, Indian Planning Commission.
The report said by any standard, China’s economic performance over the last three decades has been impressive as GDP growth averaged 10 per cent a year, and over 500 million people were lifted out of poverty.
But at the same time, China’s present growth model is unsustainable and has to undertake a host of structural reforms, Mr Zoellick said.
"Even if growth moderates, China is likely to become a high-income economy and the world’s largest economy before 2030, notwithstanding the fact that its per capita income would still be a fraction of the average in advanced economies," the report said.
"China has already achieved upper middle-income status. If the country reaches $16,000 of income per person by 2030, up from today’s approximately $5,000, then China will have an economy equivalent to adding 15 of today’s South Koreas," he said.
He said China faces challenges that are special to its circumstances, which included the leadership change as President, Mr Hu Jintao, and Premier, Mr Wen Jiabao, were set to retire by this year.
Summing up the report on behalf of the World Bank, Mr Vikram Nehru, former Chief Economist for the East Asia and Pacific region of the bank, told the conference that the Chinese economy has reached yet another "turning point" in its history, requiring a fundamental shift.
"After 30 years of near 10 per cent growth on average, China has reached another turning point when a second strategic and no less fundamental shift is called for," Mr Nehru, who along with top Chinese officials prepared the report after one-and-half-years of study, said.
The report focused on how China can achieve its vision of becoming a modern, harmonious and creative high-income society, he said.
“If it were to become a high-income society 2030, it would become the world’s largest economy at market exchange rates.
“It will be more complex, more market-driven, knowledge-driven and oriented more towards services,” Mr Nehru said.
Mr Zoellick said the report was relevant not only to China but also middle-income countries.
“This is a report that raises difficult questions. It focuses on the central policy challenges that China, and other upper middle-income countries, will need to confront," he said.
The Asian giant must overhaul its economy to avoid a sudden slowdown in growth, such as scaling back its vast and powerful State-owned enterprises and breaking up monopolies in strategic sectors, the analysts said.
Keywords: China economy, slow down, World Bank, structural reform
