Excerpts from "The Hundred-Year Marathon" book Part 6

In a remarkable reversal, the normally private sector–oriented World Bank and International Monetary Fund acknowledged that the Chinese regulations required the SOEs [State-Owned Enterprises] to safeguard the interests of the Chinese government. This was a violation of China's original commitments. Indeed, the World Bank went so far as to warn in a confidential paper in 1993 that China's other reforms would fail if the SOEs could not be improved and ultimately made profitable. The concept was to "corporatize" them, which meant a relaxation of state control to push some of the enterprises to go bankrupt or be dissolved, while others would be consolidated from many small, loss-making ones into a few large, profit-making ones. This is the beginning of what became known a decade later as the "national champions" system.

The World Bank advised China to go much farther—and so China did. The bank recommended creating portfolio holding companies, much like mutual funds in free-market economies. The most shocking proposal of all was that stock exchanges should be established to sell shares in the SOEs. (Stock markets are for private companies, not government agencies.)
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When it comes to trade and growth, America is losing to China, and the reason is simple: China cheats. It steals technology, promotes Chinese monopolies, and unfairly insulates its state-owned companies from foreign competition. For decades, it has broken the rules according to which modern nations trade across national boundaries and treat foreign investment within them. China has played by its own rules, and as its power grows an increasing number of countries will be forced to play by those rules as well. A core component of China's successful growth strategy is acquiring, often through illegal means, foreign science and technology. China has set up counterfeiting factories employing ten thousand to fifteen thousand people. China's national industrial policy goals have the effect of encouraging intellectual property theft, and a massive number of Chinese business and government entities engage in this behavior. So dramatic is intellectual property (IP) piracy in China that a software company sold a single program in China and then received thirty million requests for an update. China is at the forefront of IP theft, and regularly hacks into foreign commercial entities and turns over their IP to Chinese businesses, making China the world's largest perpetrator of IP theft. This allows the Chinese to cheat their way up the technology ladder. Such IP theft represents an estimated loss of $107 billion in additional annual sales and costs 2.1 million jobs in the United States alone. In the future, when China's economy is even bigger, and when its alliances are more extensive, it will be harder to incentivize innovators to invest in the creation of IP whose value is so easily depressed by widespread theft.

Source: The Hundred-Year Marathon: China's Secret Strategy to Replace America as the Global Superpower (2015) by Michael Pillsbury.

The World Bank is China’s useful idiot.