World Bank President Robert Zoellick has warned that as global growth is sluggish and investor confidence shaken, the world economy is moving towards a “new danger zone.”

Zoellick urged the European countries and the United States to fix their respective debt problems as soon as possible, failing which the debt crisis would snowball into one of the biggest financial crisis for the world. The world economy is entering a new danger zone this autumn,” cautioned the president. If China were to continue on its current growth path, by 2030 it would have an economy equivalent to 15 of today’s South Koreas, using market prices. It’s hard to see how that expansion could be accommodated with an export and investment-led growth model.

US, Europe need to act:- The latest U.S. labor report suggests that employment unpredictably stagnated in August while the European sovereign default risk rose to a record high, suggesting that the global economic recovery is weakening. Zoellick is upbeat about the economic growth model being followed by China. He urged the Chinese government to expedite the process of structural reforms to enable further development.

“The financial crisis in Europe has become a sovereign debt crisis, with serious implications for the Monetary Union, banks, and competitiveness of some countries,” Zoellick was quoted as saying in the Reuters.

“My country, the United States, must address the issues of debt, spending, tax reform to boost private sector growth, and a stalled trade policy. The world economy is entering a new danger zone this autumn,” cautioned the president.

Comments on China:- Zoellick is upbeat about the economic growth model being followed by China. He urged the Chinese government to expedite the process of structural reforms to enable further development. “If China were to continue on its current growth path, by 2030 it would have an economy equivalent to 15 of today’s South Koreas, using market prices. It’s hard to see how that expansion could be accommodated with an export and investment-led growth model.” – Robert Zoellick

These structural reforms will help the world’s most populous country to derive growth based on domestic consumption. Currently, China is essentially an export driven economy. So much so that the country artificially keeps its currency weak and does not revalue it for it favors Chinese exports. Some of the structural reforms include reducing income tax rates, improving healthcare services and labor mobility. “In the next 15 to 20 years, China is well-positioned to join the ranks of the world’s high income countries,” he said.

“If China were to continue on its current growth path, by 2030 it would have an economy equivalent to 15 of today’s South Koreas, using market prices. It’s hard to see how that expansion could be accommodated with an export and investment-led growth model,” averred Zoellick.

The president however cautioned that China needs to avoid the ‘middle income trap’, a situation where national productivity and income growth comes to a standstill when per capita income hits a range of $3,000 to $6,000.

“That’s a transition that only a handful of countries have made and, sadly, many have failed,” warned the president.

Article Source: Articles Engine

Here you can get the latest updates about Personal Finance News. For more details feel free to visit www.themoneytimes.com stock market updates .