National & World News

Jul 1, 3:16 AM EDT

World Bank urges China to embrace basic financial reforms


Multimedia
Video photo gallery on trash in China
China celebrates 60th year
Panorama of Tiananmen Square
Remembering Tiananmen
A year after China quake
Migrant laborers struggle to find work
Checking Beijing's Air
China's morning exercises in parks
Exploring Chinese Cuisine
Beijing Architecture Changes For Games
Woman Rescues Homeless Quake Dogs
China Holds Funeral for Panda
China's 1-child Policy Causes Extra Pain
Map of Earthquake Zone in Central China
Entrepreneurs Move Into, Out of China
Olypmics in Beijing Highlight China's Water Woes
Foreign Buyers Head to China Despite Problems
Coal Use Produces Pollution, Illness
Coal Means Profit, Woes for China
China Extending Its Reach Around the World
In China, the Desert Closes In
Latest News
China says 6.5 quake in far west kills 3, collapses homes

China expresses displeasure with Turkey accepting Uighurs

Beijing says its air pollution better in first half of 2015

Bangkok-bound flight from China makes emergency landing

US official: China, US working to end ivory trade

Buy AP Photo Reprints
Audio Slideshow
Panorama of Tiananmen Square
Remembering Tiananmen
Multimedia
Timeline on World Cup Violence

BEIJING (AP) -- China needs fundamental reform of its state-dominated financial system to keep economic growth on track, the World Bank said Wednesday.

The communist government needs to address wasteful investment, over-indebtedness and weak regulation of its shadow banking system, the bank said in a report. It said failure to do that could "deflect the economic trajectory."

The recommendations echo private sector analysts who say Beijing needs to overhaul a government-run banking system that subsidizes state industry at the expense of savers and that provides little credit to entrepreneurs and emerging industries.

"China has reached a critical phase of its economic and social development path," the World Bank said. The financial system "will need to be transformed to increase the efficiency of new investments and widen access to finance, enabling China to sustain solid growth and rebalance its economy."

The bank said it expects China's economic growth to decelerate this year to 7.1 percent from last year's two-decade low of 7.4 percent. It said growth should decline further to 6.9 percent by 2017.

The communist leadership is in the midst of a marathon effort to make China's economy more efficient and productive, in part by giving entrepreneurs a bigger role. The leadership has promised to make the banking system more market-oriented but has taken only modest steps to ease controls on interest rates and increase lending to the private sector.

Beijing needs to separate its roles as owner of China's banks, regulator and strategic planner and to construct a system that channels more lending to productive industries and manages risks better, the World Bank said.

The Chinese state has formal ownership of 65 percent of commercial bank assets and de facto control of 95 percent of assets, according to the report. It said that while some other countries have state-owned banks, China's entire financial system is government-dominated.

"Instead of promoting the foundations for sound financial development, the state has interfered extensively and directly in allocating resources," the report said.

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.

 

HamptonRoads.com

PilotOnline.com