Justin Lin Yifu, a World Bank's former chief economist, has repeatedly said that he believes China still has the potential to maintain an annual economic growth rate of around 8 percent for the next 20 years, a belief that is being questioned by China's academic and public circles.

Lin Yifu, a World Bank's former chief economist.[File photo]

"I said in the long run, China has the potential and much room for further development. However, many people insist that this is not possible, which demonstrates that the public have no faith in their country's future," Lin said at a panel discussion hosted by Peking University's National School of Development on March 25.

Lin claims that people do not believe his prediction for a variety of reasons. First, the mindset of "the state advances while the private sector retreats" has negatively affected public confidence. Second, it is impossible for young families to buy a house due to soaring property prices. Third, unfair income distribution and government corruption have increased the wealth gap between rich and poor. Finally, serious environmental degradation is no longer tolerated by the public.

Lin believes that the government must further deepen reform efforts, including economic and administrative reforms, if it is serious about maintaining high-speed development. State-owned enterprises have established monopolistic position across a wide range of industrial sectors, creating the "state advancing while private sector retreating" phenomenon. This must be changed, Lin said.

The former World Bank chief economist went so far as to say that the Chinese government should carry out measures to promote market reform across all industries with the sole exception of the military.

In the field of financial management, Lin advised that China should learn from the other developed countries.

For example, in China, if an enterprise applies for a 100 million yuan loan, it will get 100 million yuan from the banks. However, the actual need of the enterprise was only 25 million yuan. Then, the enterprise will use the rest of the money to invest in real estate sectors, creating real estate bubbles.

In developed countries, financial institutes will only approve 25 percent to 30 percent of total loans, and the rest will be granted according to the process of investment, which is helpful for banks to exercise supervision over the performance of the debtors.

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