CHINA has reached a "turning point" in its economic development, with the pace of growth likely to nearly halve in the next two decades, World Bank and Chinese government researchers said yesterday.

The Asian giant must overhaul its economy to avoid a sudden slowdown in growth, such as scaling back its vast and powerful state-owned enterprises and breaking up monopolies in strategic sectors, the analysts said in a report.

After averaging 10 per cent annual growth for the past 30 years, China's export- and investment- driven economic model was no longer sustainable, World Bank president Robert Zoellick said at the launch of the China: 2030 study.

"The case for reform is compelling because China has now reached a turning point in its development path," Mr Zoellick told a conference in Beijing.

"The country's current growth model is unsustainable.

This is not the time just for muddling through - it's time to get ahead of events and to adapt to major changes in the world and national economies."

The report was backed by Vice-President Xi Jinping and Vice-Premier Li Keqiang, who are expected to succeed President Hu Jintao and Premier Wen Jiabao during a major transition of power that begins at the end of this year.

But the report - prepared by the bank and the Development Research Centre, a top Chinese think-tank that advises China's Cabinet, the State Council - is likely to face resistance from people with "vested interests" in the current model, Mr Zoellick said.

"Reforms are not easy - they often generate pushback," he said.

Dr Liu Shijin, Vice-Minister of the Development Research Centre, said the reforms were necessary as the world's secondlargest economy slows to 5 to 6 per cent annual growth in the next 20 years, from the current 9 per cent.

Chinese leaders frequently talk about the need to reform the country's economic model, partly by reducing its heavy reliance on exports and increasing domestic consumption.

But significant reforms have been slow as stability-obsessed leaders try to maintain rapid economic growth, seen as essential to create enough jobs for the country's 1.3 billion people and keep a lid on unrest.

An executive summary of the 400-plus page report, made public by Mr Zoellick, had six broad recommendations for Beijing: Strengthen a market-based economy, foster innovation, go "green", provide social security for all, improve the fiscal system and seek mutually beneficial relations with the world.

Among other specific recommendations, it urged Beijing to commercialise banks and allow interest rates to be set by the financial market, develop its private sector, protect farmers' rights and cut local governments' dependence on land revenues.

The outcome of these changes would produce a China that is more socially stable and equal in wealth distribution, relies less on exports and investment for economic growth, and more on domestic consumption that can be sustained, the bank said.

"The reforms that launched China on its current growth trajectory were inspired by Deng Xiaoping, who played an important role in building consensus for a fundamental shift in the country's strategy," the report said.

Mr Zoellick acknowledged that the World Bank and Beijing had disagreed over the contents of the report.

But Mr Zoellick said the report "stops short of being overly prescriptive", as requested by the Chinese authorities, and recognises that any recommendation needs further discussion within Beijing before it can be implemented.

AFP, REUTERS