Competition Key to China's Success, Says WB Chief Economist

BEIJING, July 26 (Xinhua) -- Visiting Chief Economist of the World Bank (WB), Joseph Stiglitz, cited competition as the key to the huge success in China's reform policies over the past two decades.

Delivering a paper at the invitation of the Chinese Academy of Social Sciences, Stiglitz, who is also the WB's Vice Senior President, said Sunday that "China's recent experience is one of the greatest economic success stories in history."

The noted economist further expressed the belief that competition is central to the success of any economy and has played a big role in China's success in the past two decades.

When comparing China's reform with that of the Russia, he said China extended the scope of competition without privatizing state- owned enterprises, whereas Russia privatized a large fraction of its economy without doing much to promote competition.

As a result, he added, Russia's output is over 50 percent below the level it had attained almost a decade ago, while China sustained double-digit growth for almost two decades.

Stiglitz said policy-makers of many transitional economies have in the past given too much emphasis on privatizing public assets to the neglect of the role of competition, which is vital for a market economy.

He warned that privatization would not be able to improve efficiency in the absence of necessary regulations and competition.

Stiglitz further suggested that wherever possible, changes of ownership structure should be preceded by the introduction of greater competition.

Again on China, he said, the country is lucky, because its vast market not only makes it possible for a large number of enterprises to exist and compete in most industries, but also attracts a large number of foreign firms competing to enter the market, hence bring more benefits in both trade and investment to China.

Moreover, he acknowledged that government-imposed and historical barriers have resulted in competition not being as strong as it might be in China.

For example, he noted, while competition in retail sector is quite strong, it has remained limited at the wholesales level.

Another concern is that local and provincial authorities sometimes take actions which impede competition and factor mobility across provinces, making it more difficult to establish nation-wide enterprises.

The WB Chief Economist said though China has done much to establish the foundation of the market economy, enormous challenges remain ahead, if there is to be long-term sustainable and equitable growth.

Among the issues that have to be attacked are the creation of effective regulatory structures and the development and enforcement of strong competition policies, he said.

Stiglitz, who arrived here Wednesday as guest of the Chinese Ministry of Finance, left China Sunday.