World Bank: China to Be Top Economy?

The  much anticipated China 2030: Building a Modern, Harmonious, and Creative High-Income Society, put together by the World Bank and Development Research Center of China’s State Council, reaches two main conclusions that are nearly opposites. China could become the world’s largest economy within two decades if it follows the path laid out in the report. Or, without an open market economy, it could collapse under the weight of the transition to a developed nation.

The report makes the two options clear:

The case for reform is compelling because China has now reached a turning point in its development path. Managing the transition from a middle income to a high-income country will prove challenging; add to this a global environment that will likely remain uncertain and volatile for the foreseeable future and the need for change assumes even greater importance.

Or:

The reform agenda, with a stronger and more flexible financial sector, the promotion of innovation, and green growth as drivers of development, can lead to opportunities for creating new jobs and additional productivity within China as well as new opportunities for foreign firms.

For decades China’s leadership has believed that an economy and business environment controlled by the central government, along with restrictions on what the general public knows about the outside world, were a near-perfect way to increase gross domestic product.

The same Chinese leadership, and particularly those people who will come into power later this year, have a number of reasons to reject many of the recommendations. The first is that a more open society and economy with fewer regulations would push them out of power to some extent. The other is that the current system has fueled a growth rate of nearly 10% a year over the past decade. If it isn’t broken, don’t fix it, the central government may argue.

A brief challenge to the report, in this case a few hundred words, is hardly a compelling reaction to the report. But the Chinese central government has rejected many similar programs and recommendations in the past.

Douglas A. McIntyre