To read about the departure from traditionalist policies by the multilateral agency the World Bank, who usually espouse on more regulations and bigger governments, but now recommends Economic FREEDOM for China or else risks a collapse in the face unsustainable state based Keynesian policies, is certainly a refreshing development.
The mainstream seems to be more and more assimilating the reality that only economic freedom (laissez faire capitalism) is the key to prosperity.
From the CNN Money
The World Bank and a Chinese think tank will have a stern warning in store for China's government on Monday: Transition to a freer commercial system, or else face an impending economic crisis.
As first reported by the Wall Street Journal, the "China 2030" report recommends China enact reforms promoting a freer econom. Those reforms include a major overhaul turning China's powerful state-owned companies into commercial enterprises.
The World Bank confirmed it will release the report Monday in Beijing.
The report is compiled by the World Bank and the Development Research Center, a research group that reports directly to China's State Council. According to the Wall Street Journal, it encourages China to also promote innovation, competition and entrepreneurship as a means of economic growth, rather than allowing growth to be primarily government engineered.
The world's second largest economy has been rising rapidly, averaging around 10% growth a year for the last three decades. Much of that momentum has come as China's rural population moves into the cities and as the government has funded massive infrastructure projects and retained a powerful influence over the country's biggest companies.
State-owned companies dominate China's banking, energy, telecom, health care and technology sectors. Overall, they account for about 40% of the country's gross domestic product, estimate Andrew Szamosszegi and Cole Kyle, who have researched the topic for the U.S.-China Economic and Security Review Commission.
Their latest report to the commission puts it bluntly: The Chinese government has not "expressed an interest in becoming a bastion of free market capitalism."
Yeah. The last statement seems like an epiphany for the World Bank.
Here is the official press release from the World Bank, where you can download on the report
China should complete its transition to a market economy -- through enterprise, land, labor, and financial sector reforms -- strengthen its private sector, open its markets to greater competition and innovation, and ensure equality of opportunity to help achieve its goal of a new structure for economic growth.
These are some of the key findings of a joint research report by a team from the World Bank and the Development Research Center of China’s State Council, which lays out the case for a new development strategy for China to rebalance the role of government and market, private sector and society, to reach the goal of a high income country by 2030.
The report, “China 2030: Building a Modern, Harmonious, and Creative High-Income Society”, recommends steps to deal with the risks facing China over the next 20 years, including the risk of a hard landing in the short term, as well as challenges posed by an ageing and shrinking workforce, rising inequality, environmental stresses, and external imbalances.
While I agree that current policies by the Chinese government have been merely blowing bubbles—which eventually would meet its fate—paradoxically, much of the world have been pursuing the same policy template, albeit at varying degrees. (yes the Philippines too)
In particular, crisis afflicted nations led by the US and key developed economies seem to be reversing their embrace of the market economy paradigm as inflationism has emerged as the dominant trend in policymaking.
Add to this are the numerous regulations being imposed, aside increases in taxation that suppresses and inhibits ‘competition and innovation’.
Selective censures would only be discerned as politicking that may cause insulation and would likely be ignored by the Chinese authorities.
The World Bank has to make Economic Freedom (laissez faire capitalism) the foundation of their economic development model for everyone.
As the great Ludwig von Mises once wrote,
A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society.
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