World Bank urges China to embrace basic financial reforms

BEIJING: The World Bank has urged China to carry out fundamental reform of its state-dominated financial system to keep economic growth on track.

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

The recommendations echo those of 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.

The World Bank said 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.