World Bank President James Wolfensohn has recommended to China that it improve its corporate governance to keep foreign investors and attract new ones. Mr. Wolfensohn has been consulting with Chinese officials in Beijing on needed market-oriented reforms. The World Bank chief says China needs to build business transparency and accountability as it moves ahead with reforms required as a new member of the World Trade Organization.
"It's very simple, whether you're Chinese or American: If you think someone is dishonest, not telling the truth, you don't give them money," said Mr. Wolfensohn. "Let's have agreed standards of accounting and transparency, which is what is understood now as being the policy of this government."
The World Bank has issued a report saying one of the biggest challenges facing China is combating entrenched corruption as it reforms state-owned enterprises. Mr. Wolfensohn says this is a key issue and effective legal and judicial systems must be created to ensure a healthy, functioning corporate environment.
Speaking in Beijing Sunday at a symposium on corporate governance, he said that in order to successfully integrate into global corporate community, China may need to overcome a cultural legacy that has traditionally valued secrecy in business.
"It is a very rich culture, which has been built much less on openness than it has been built on family and keeping to oneself where one is going and what one is doing," noted Mr. Wolfensohn. "And which has also been a culture of state-owned enterprise where the issue of responsibility and accountability has not always been clear.... It is an issue that has come to the fore in terms of the banking system itself, in terms of non-performing loans, in terms of a culture that has not been always designed for repayment of debts. It has not been a culture in which creditors have been able to protect their rights. It has been a culture where there has been diffused responsibility," he said.
China is one of the largest recipients of foreign investment of any developing country and Mr. Wolfensohn has been in Beijing to discuss the World Bank's strategy for assisting China in its transition to a more market-oriented economy.