BEIJING: The World Bank (WB) on Wednesday urged China to accelerate reform of its state-dominated financial sector, warning that failure to address the issue could end ‘three decades of stellar performance’ for the world’s second-largest economy.

The ruling Communist Party has pledged a wide range of economic reforms and the Washington-based institution said reducing the ‘unique and distorted role of the state’ in banking and the wider financial sector was crucial.

“Wasteful investment, overin-debtedness, and a weakly regulated shadow-banking system,” had to be addressed for the broader agenda to succeed, it said.

The comments in the China Economic Update were unusually forthright for the World Bank.

“Unlike other countries, in China the state still maintains pervasive ownership and control of banks and other financial institutions,” it said, including with powerful internal Communist Party committees and authorities appointing and dismissing top executives. “The state has formal ownership of 65 per cent of commercial bank assets and de facto control of 95 per cent of these assets, making it an outlier by international standards.”

In some cases, it added, authorities were simultaneously owners, regulators and customers of banks. China’s financial system was still ‘unbalanced, repressed, costly to maintain, and potentially unstable’, the bank said, repeating its description from a 2012 report.

In the document, the WB left its economic growth estimate for China this year at 7.1 per cent.

Indian rail project to get $650m support

NEW DELHI: The World Bank said on Wednesday it had cleared a $650 million loan for a huge Indian freight rail corridor that will span 1,840 kms across the northern heartland of the country. Construction of  the Eastern Dedicated Freight Corridor will help speed up the carrying of goods between Ludhiana in the west of India and Kolkata in the east, and is part of a series of new freight lines the World Bank says India needs to ease congestion on its network. — Reuters