China To Be Largest Economy Before 2030: World Bank

China must relax its grip on industry and move towards a free-market economy, the World Bank said on Monday in a report that forecast the country would become the world's largest economy before 2030.

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Judging China to be near an inflection point in its economic growth, the World Bank called on Beijing and its incoming leaders to overhaul the structure of the world's No. 2 economy to keep income and productivity rising in years ahead.

"As China's leaders know, the country's current growth model is unsustainable," World Bank President Robert Zoellick said in Beijing at the launch of the "China 2030 Report".

"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."

An executive summary of the 400-plus page report, made public by 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 commercialize 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.

"China has reached another turning point in its development path when a second strategic, and no less fundamental, shift is called for."

G20 Inches Toward $2 Trillion in Rescue Funds for Europe

Germany is easing its opposition to a bigger European bailout fund, officials said, smoothing the way for the world's leading economies to secure nearly $2 trillion in firepower to prevent further fallout from the euro-zone's sovereign debt crisis.

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Finance leaders from the Group of 20, meeting in Mexico City this weekend, are trying to build up massive international resources by the end of April to convince financial markets they can prevent the euro-zone's deep problems from inflicting more damage on a still-fragile world recovery.

It would mark their boldest efforts since 2008 when the G20 mustered $1 trillion to rescue the world economy from the credit crisis, which blew up in the United States and caused the worst recession since the 1930s.

They are demanding that Europe build up its war chest first and then other G20 countries would contribute extra money to the International Monetary Fund.

As Europe's richest economy, Germany's support for a larger European fund is critical.

A senior G20 official said Berlin was prepared to discuss boosting the firewall in March, but it saw no reason to increase the bailout fund for now because the situation in financial markets has been improving.

The plan is to merge Europe's temporary and permanent bailout funds, the European Financial Stability Fund and the European Stability Mechanism , to create one 750 billion-euro ($1 trillion) fund. Increased IMF resources would back that up.

"Everyone in the euro zone and even in European Union is reasonably happy with combining the ESM and the EFSF, even Germany, but it is too early to say if this will be decided at the EU summit at the beginning of March," said Margrethe Vestager, economy minister of current EU president Denmark.

Merging the funds would mark a softening of Berlin's stance. It has warned that a bigger fund would remove pressure on deeply indebted countries to enact the tough fiscal measures and economic reforms needed to bring their budgets under control.

G20 finance chiefs are piling the pressure on Germany as they try to line up the roughly $2 trillion in resources by the time they next meet in April and draw a line under the two-year-old euro-zone crisis. Read more

Is the Smart Money Heading for the Sidelines?

Retail investors have begun to take the driver's seat in Wall Street's aggressive rally, an indication both that the surge could have some life yet and that it's likely nearing an end.

Mutual funds — the vehicles through which most mom-and-pop investors play the stock market — had lost funds for nine consecutive months heading into February.

But over the past several weeks the tide has turned.

Stock funds have seen inflows in three of the past four weeks, with another $1.04 billion coming in for the week ending Feb. 15, according to the most recent data from the Investment Company Institute. Unless there is a major shift in allocation, February is shaping up as a solidly positive month for stock fund inflows.

Trouble is, the last time retail investors didn't take more out of their funds than they put in was last April, which saw inflows of about $6 billion.

That move coincided with the end of a stock market rally that looked much like the current one — a big surge higher as the year began that preceded an ugly six-month skid that made sell-in-May-and-go-away the trade of the year in 2011.

What's more, institutional investors — often referred to as part of the "smart money" in the market because of their insider position — have been slowly heading for the exits.

After pulling about $100 million from zero-yielding money market funds in 2011, the folks with the deep pockets are heading back toward the sidelines. Institutional deposits have increased by $9 million in February — a relatively miniscule amount, to be sure, compared to a total of $1.74 trillion on hand, but a number that's been steadily rising.

Finally, corporate insiders are taking an increasingly cautious approach as well.

They've dumped $4.2 billion in stock this month, about double January's level and — here's that warning sign again — the most since May 2011 as last year's rally fizzled, according to TrimTabs.

Company stock buybacks, meanwhile, are at a healthy $2.1 billion daily level, but are mainly concentrated among a few big purchasers. The number of daily buyback announcements is at its lowest level since the October to November period of 2009. Read more

Finally, a Greek Deal: What Next for Markets?

he second Greek bailout deal was finally clinched in the early hours of Tuesday morning.

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European markets and the euro were initially expected to rally after the market open – but a troika report leaked to the Financial Times could exacerbate fears in the market that Greece may not be able to hit its bailout targets and drive markets down again.

“Short term you’re still in the vagaries of what politicians do day-to-day. This is still a sentiment-driven market,” Ian Harnett, European Strategist, Absolute Strategy Research, told CNBC.“The big message has got to be that the European governments want to keep the euro together and that will lead to a weaker euro.”

A weaker euro [EUR=X 1.3242 -0.0003 (-0.02%) ] could help countries in the single currency bloc in the medium term.

“The key for us is fundamental monetary policy. The exchange rate has to do the work,” Harnett said.

The euro is expected to move upwards on the news in the short term. “A break of 1.3350 in EUR/USD looks necessary to trigger the next round of stops, which could then see a move into the high 1.30s,” currency strategists at Lloyds wrote in a research note.

The lack of the opportunity for devaluation, which was used to help solve the Asian crisis of late 1990s, will limit opportunities for growth, Jonathan Tepper, Partner at Variant Perception, told CNBC.

The “internal devaluation” provided by austerity measures such as wage cuts will not provide the necessary medicine, he believes. While Latvia and Ireland have achieved some relative success using these methods, he argues that their rising emigration levels shows that they have not been entirely successful.

“The idea that somehow Greece and Portugal will be able to restore competitiveness or that the imbalances between the core and periphery will be able to solve themselves is slightly ridiculous,” he said. Read more