A World Bank report prepared with lots of input from Chinese researchers and blessed with high level Chinese government support is calling for fundamental changes in the country’s growth model, reports the AP.In particular the report calls for a shift away from large state owned enterprises to private firms if the economy is to continue to grow.This will come as a profound shock to so many in the developing world and even in the US who think that the Chinese have discovered a sustainable alternative to market capitalism. Apparently, not even the Chinese leadership thinks this is the case, and making China more market-friendly and less state-driven is seen as the key to the country’s future.VM thinks this is about right and salutes the courage and vision of the Chinese leaders and researches willing to confront this reality. But making the change will be difficult. A system in which state-guided banks make lots of cheap loans to state-owned enterprises will become progressively more expensive and unmanageable, but that cheap credit nexus is a vital support for the Chinese governance model, and especially at the local level.China must change, but changing China will be fiendishly hard. In the meantime, those who favor the so-called Beijing Consensus need to come to terms with the reality that even in Beijing the smart money sees this approach as, at best, a temporary stage on the road to true capitalist modernity.
China to Embrace New Growth Strategy?