China’s growth engine needs a “tune-up” and needs to shift away from a dependence on investment and exports, World Bank president Robert Zoellick said in Beijing yesterday.
It will be difficult for China to continue to rely on exports and investment for growth over the next decade especially when developed economies are finding it difficult to boost growth, Zoellick said at the end of a five-day visit to China.
Zoellick said his discussions with Chinese officials suggest some policymakers think a change in the exchange rate alone won’t be enough to resolve the country’s structural problems.
Photo: Reuters
Zoellick met with officials that included Chinese Vice President Xi Jinping (習近平), vice premiers Li Keqiang (李克強) and Wang Qishan (王岐山), Finance Minister Xie Xuren (謝旭人), People’s Bank of China Governor Zhou Xiaochuan (周小川) and China Construction Bank Corp (中國建設銀行) chairman Guo Shuqing (郭樹清). He said China can help boost tepid global economic growth by pressing ahead with reforms to promote its own domestic consumption.
The World Bank is working with China’s government to find ways to promote consumption and reduce the country’s reliance on exports and investment, he said.
Zoellick said that promoting consumption-based economic growth is necessary because the world economy cannot get out of its current problems just by relying on austerity measures.
Europe’s problems are a combination of sovereign debt, the banking industry and competitiveness, he said. If the value of sovereign debt strengthened, the banking industry would see an improvement, he said when asked if banks in Europe need a bailout.
“The world economy is entering a new danger zone this autumn,” Zoellick said in a speech on Saturday. “The financial crisis in Europe has become a sovereign debt crisis, with serious implications for the monetary union, banks and competitiveness of some countries.”
“Decisions in Europe, decisions in the United States, decisions in China — they affect all of us,” he said. “China’s structural challenges occur in a current international context of slowing growth and weakening confidence.”
In July, the World Bank labeled China, the world’s second-largest economy, an “upper middle income” country, alongside countries like Brazil and Turkey.
“In the next 15 to 20 years, China is well-positioned to join the ranks of the world’s high-income countries,” Zoellick said.
The high-income echelon consists of countries such as Japan, Germany and the US, according to the bank’s classifications.
Additional reporting by AP
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