China needs to rebalance economy: World Bank

World Bank Chief Robert Zoellick has asked the Chinese government to hasten planned structural reforms to shift the focus of its export-driven economy toward domestic consumption-led growth as the global economy entered a "new danger zone" this autumn.

Robert Zoellick told a news conference on Monday that 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.

Communist authorities have said repeatedly they want more self-sustaining growth based on domestic consumption. But they have made little progress, and investment as a share of China's economy rebounded after Beijing launched a stimulus based on public works spending following the 2008 global crisis.

The World Bank is working with Beijing on developing ways to rebalance the world's second-largest economy, Zoellick told reporters after meeting with Chinese officials.

Changes might include relying on the market instead of the government to allocate natural resources and overhauling the relationship between state-owned and private companies, Zoellick said.

Zoellick said promoting consumption-based economic growth is necessary because the world economy cannot get out of its current problems just by relying on austerity measures.

Zoellick's comments came amid mounting fears the United States might be headed back into recession after the Labor Department reported Friday the economy added no jobs in August, its worst employment report in 11 months.

Coming months will be a "sensitive time" for developed economies as Europe wrestles with a debt crisis and the US tries to shore up growth, he said. Weakening global demand might add to Beijing's urgency in trying to promote retail spending and other domestic consumption. But analysts say the many steps required to do that will take time, such as creating more government-financed health care to reduce the need for families to save so much in order to pay for emergencies.

China's spending on new factories and other investment has accounted for more than 40 per cent of its economic output over the past decade — several times the level of the United States, Japan and other major economies. It rose close to 50 per cent in 2009 due to stimulus spending, according to the International Monetary Fund.

"When you have inflation there are different tools. One is if China appreciated its currency more, that would make foreign goods cheaper in China. Another is the expansion of credit. A third dimension is to remove supply barriers," he said.

There are growing concerns over grain production as the rate of urbanisation intensifies. "China is moving with technology so that each farmer can be more productive. China can boost output without necessarily using more land," he said.

Source: The Economic Times