New Push or Reform in China.docxVIP

New Push for Reform in China Influential Report to Warn of Economic Crisis Unless State-Run Firms Are Scaled Back By HYPERLINK /search/term.html?KEYWORDS=BOB+DAVISbylinesearch=true BOB DAVIS BEIJING—An exclusive preview of an economic report on China, prepared by the World Bank and government insiders considered to have the ear of the nations leaders, offers a surprising prescription: China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms. China 2030, a report set to be released Monday by the bank and a Chinese government think tank, addresses some of Chinas most politically sensitive economic issues, according to a half-dozen individuals involved in preparing and reviewing it. It is designed to influence the next generation of Chinese leaders who take office starting this year, these people said. And it challenges the way Chinas economic model has developed during the past decade under President Hu Jintao, when the role of the state in the worlds second-largest economy has steadily expanded. Enlarge Image Reuters A Chinese mine, a sector where state-run firms employ 44% of workers. The report warns that Chinas growth is in danger of decelerating rapidly and without much warning. That is what has occurred with other highflying developing countries, such as Brazil and Mexico, once they reached a certain income level, a phenomenon that economists call the middle-income trap. A sharp slowdown could deepen problems in the Chinese banking sector and elsewhere, the report warns, and could prompt a crisis, according to those involved with the project. It recommends that state-owned firms be overseen by asset-management firms, say those involved in the report. It also urges China to overhaul local government finances and promote competition and entrepreneurship. Enlarge Image Chinas state-owned sector is at a crossroads, said Fred Hu, chief executiv