The World Bank and a Chinese government think tank will release an economic report on Monday, called “China 2030,” which warns of a hard landing for China unless it enacts reforms to a system dominated by state-owned enterprises. The Wall Street Journal has an exclusive preview:
The report warns that China’s growth is in danger of decelerating rapidly and without much warning. That is what has occurred with other highflying developing countries, such as Brazil and Mexico, once they reached a certain income level, a phenomenon that economists call the “middle-income trap.” A sharp slowdown could deepen problems in the Chinese banking sector and elsewhere, the report warns, and could prompt a crisis, according to those involved with the project.
The World Bank and DRC argue that asset-management firms should oversee the state-owned companies, say those involved in the report. The asset managers would try to ensure that the firms are run along commercial lines, not for political purposes. They would sell off businesses that are judged extraneous, making it easier for privately owned firms to compete in areas that are spun off.
“China needs to restrict the roles of the state-owned enterprises, break up monopolies, diversify ownership and lower entry barriers to private firms,” said Mr. Zoellick in a talk to economists in Chicago last month.
World Bank President Robert Zoellick will visit China next week to unveil the report, according to The China Daily. For more on the challanges faced by China’s economy, see also CDT Money, a weekly rundown of business and economic news from China.