China is on good path, World Bank chief says

Beijing's fiscal and monetary policy transparency 'bolstering confidence'

China has realized the critical importance of communication, and the world is going to see more transparency and clarity in the country's decision-making, according to the World Bank president.

"I met Premier Li Keqiang on Wednesday (Feb 24), and he told me they had realized the importance of communication," Jim Yong Kim said on the sidelines of the two-day G20 meeting in Shanghai on Feb 26.

"A lot of suspicion is that things are happening, but the global community is not sure why things are being done. ... The fact that you tell what exactly your intention is, in terms of fiscal policy, monetary policy, status of structural reform, that kind of communication will go a long way to dispel the doubts."

Such communication is critical on the exchange rate issue, he says, referring to an issue that grabbed global attention during the meeting for central bank chiefs and finance ministers.

Kim cited recent communication by Zhou Xiaochuan, governor of the People's Bank of China, as showing the nation's progress.

"The biggest issue about the renminbi is people fear they don't know how decisions are being made," the World Bank president says. "Now Zhou is coming out and saying they are looking at a basket of currencies and making decisions based on the yuan's relation with a basket of currencies.

"China is on a very good path. Zhou is communicating, he is even communicating in English, which I think is really important. What you are going to see is more transparency."

The importance of communication also applies to the Chinese economy, he adds.

"Chinese leaders say they are going to move away from a strategy based on investment and exports to consumption and service. That's happening. China is engaging in reforms in the financial sector, hukou (household registration) and healthcare. We're working with them on these reforms so we're much more optimistic about what's happening here than some observers from outside."

However, Kim says it is critical for China to "maintain the momentum of structural reform" and to keep communicating, frequently and broadly.

He revealed that during his meeting with the premier, Li discussed how to foster China's new economic drivers. "This is his top priority. He wants to think about all the different ways that China can grow in the future."

Kim says the World Bank is pleased that Li has trusted the organization to do a third report on policy recommendations on China, about its healthcare reform. The bank previously undertook two studies with a Chinese think tank on China's 2030 growth strategy, and urbanization. Both stimulated wide debate.

Commenting on the World Bank's cooperation with the Asian Infrastructure Investment Bank, Kim says his organization will co-finance projects. He welcomed China's embrace of multilateralism and adds that the world expects more Chinese leadership.