What Exactly Did Zoellick Say?

Robert Zoellick, who is soon stepping down as the president of the World Bank, held a press conference some days ago in Beijing, answering questions surrounding “China in 2030,” published jointly by the World Bank and the Development Research Center of the State Council of the People’s Republic of China (PRC). Unexpectedly, an “independent Chinese scholar” created a scene at the conference. He stood before the conference chairmen and claimed that the World Bank’s report is a shot of poison to China and it would not benefit China’s economy and its people in any way. He demanded that the World Bank take the poison and go back to the U.S. He continued passionately until a big man carried him out of the conference room in order to allow the conference to continue.

The audience was said to have different reactions to the protestor who appeared out of nowhere: shock, doubt, laughter, anger, and even dancing about. It was Zoellick himself who did not seem surprised. Not only was he calm, he appeared to be at ease. Perhaps the Chinese do not come across such scenes often, and thus exhibited great interest in the uninhibited statements of this so-called independent Chinese scholar. Many netizens pronounced him a “patriotic scholar” and the “conscience of the people” and cast doubts on the intentions of what they call the “American World Bank.” There were even more who accused the World Bank of “making irresponsible comments” and “acting preposterously” against China. In an online questionnaire, as many as 71 percent of those polled believed that the World Bank report was poison for China.

What exactly did Zoellick say? We need to first read the study report, “China in 2030,” that started this dispute. It says China is facing all kinds of risks both domestically and externally and that the linear growth it has had in the past is unsustainable. China has reached a turning point, and it needs to once again undergo a fundamental strategic transformation. Although China has the potential to become a high-income society that is modern, harmonious and innovative by 2030, this will not be realized easily. This is because the risks that China will be facing in the 20 years to come include hard-landing risks that will emerge in the short term, the aging of the population and the reduction in the labor force in the mid and long term, the increase in the extent of inequality, as well as the challenges posed by environmental pressure and external imbalance.

The Six Remedies the World Bank Prescribed for China

The World Bank has even prescribed six remedies such as the completion of the market economic transformation for China’s development in the next 20 years. The first is to push for structural reform, redefine fiscal roles, reorganize state-owned enterprises and banks, and develop the private enterprise economy. The second is to establish an innovation system to encourage product and technological innovations of Chinese enterprises by conducting their own research and development and participating in such R&D networks. The third is to catch hold of “green” opportunities through methods such as incentives, regulation and investment. The fourth is to allow every person to receive equal employment opportunities and social welfare. The fifth is to establish a stable financial accounting system to ensure that the local governments have sufficient financial power to handle expenditures. The sixth is to take the initiative to make use of the multilateral system and framework and influence the global governance agenda to create a win-win situation for China and the rest of the world.

No matter how we look at it, the components of these six remedies are nothing new. In over 30 years of China’s reform and opening, various government endeavors have been striving towards these same goals. The reason the report was called “poison” by the scholar is that what the World Bank sold to China this time are platitudes that have been proven to have failed in countries with fully privatized economies, such as those in Latin America. The purpose is to “destroy China’s economy and attempt to allow a small number of people in China and Wall Street to plunder the citizens of China in the name of deepening reform.” The protestor at the conference claimed that World Bank economist Augusto de la Torre had admitted to the complete failure of the privatization of Latin America.

Dissenting voices are certainly permitted in the scholastic circles. Whatever name one calls oneself, be it the independent Chinese scholar or the Imperial Scholar, the key is whether one is able to speak from a fair and objective standpoint. It should be pointed out that the Chinese government advocates establishing a fair and harmonious society as well as innovation in philosophy and technology and participation in international competition. Not only does this foster the healthy development of the Chinese society, it also complies with the mainstream of the development of human civilization. As for saying that the post of the World Bank president is a tool that the U.S. uses to control the world because its presidency is “inherited” by the Americans exhibits an obvious lack in the salient knowledge of history. It should be noted that the initial intent of establishing the World Bank was to help post-World War II European countries rebuild themselves. Therefore, the agreement between Europe and the U.S. is that the president of the World Bank is to be an American while the International Monetary Fund’s chief executive officer is to be a European.

In recent years, with the rise of some economies, the policy of an American-led World Bank has been challenged. Renowned Chinese economist Justin Yifu Lin’s appointment as the chief economist and senior vice president of the World Bank has proven that emerging nations have the right to speak. The various investments as well as the implementation of various currency policies must be voted on and approved by representatives of the IMF. Therefore, the main task of the World Bank is to help various nations to eliminate poverty through funding. It proposes ideas for the development of nations such as China, sources for investment projects and proposes suggestions and solutions for the use of the funds.

Do Chinese State-Owned Enterprises Really Not Need Reforms?

In the eyes of that “independent Chinese scholar,” China’s state-owned enterprises are operating very well, and salaries are higher than those of private enterprises. There is thus no need for privatization in his opinion. This is a conclusion that goes against common sense and is not objective. Putting aside the “high-priced chandelier,” “group procurement of Mao Tai,” and “luxury sports cars,” state-owned enterprises such as telecommunications, power supply, oil and tobacco companies enjoy preferential policies while exercising a high degree of monopoly. The worst part is that these enterprises pay less than 15 percent in taxes. In addition to that, most of the state-owned enterprises are overstaffed, their organization structures swollen. They also have extremely low efficiency and seldom take on social responsibilities. This has caused a severe imbalance in the distribution of social benefits.

To a certain extent, Zoellick’s words were more pertinent than those of the “independent Chinese scholar.” For example, he said that state-owned enterprises in China have received a lot of benefits but have not allowed the people to enjoy these benefits. He also said the Chinese leaders are paying attention to the people of China, not to specific interest groups. Whether these words were sincere is a story for another time, but it at least is not considered irksome by the Chinese public. In reality, the report, “China in 2030: Building a Modern, Harmonious and Innovative High-income Society,” is the fruit of the joint effort by the World Bank and the Development Research Center of the PRC that took 18 months to complete. Zoellick indicated that the report received approval and a “firm promise”* of Chinese Executive Vice-Premier Li Keqiang.

There is a classic saying in the book, “The New Poems of Tang – The Biography of Lu Xiangxian,” that says, “There is no trouble in the world, but that which the mediocre man stirs up to frustrate the ear. Once the mind is clear, there is no fear of complication.” The latter sentence, when paraphrased in modern terms, means that if one is clear-minded from the start, things would be much simpler. It is a pity that the “independent Chinese scholar” and his supporters have made the mistake of frustrating themselves on this issue. Their sense of inferiority has transformed into a kind of blind self-responsibility. One is reminded of the time when Duke Cai Heng told Bian Que that hiding an illness and refusing to seek treatment could only lead to one’s illness becoming more serious.**

*Editor’s note: the original quotation, accurately translated, could not be verified.

**A reference to a classic Korean tale.