GOLDMAN SACHS: This is how to fix China

China needs to reinvent its economy.

That's the word from four Goldman Sachs executives, who weighed in on China's lagging economic growth in a video published by the banking giant.

The four execs, including CEO Lloyd Blankfein, said that China needs to transform into a capitalist and consumer-driven economy - but it's going to be a slow and gradual process.

The video was published prior to the announcement on Tuesday that Blankfein had 'highly curable' lymphona.

China's current growth strategy has led to "inefficient allocation of capital and resources," with "less focus on privatization and more emphasis on state-owned enterprises," according to Mark Schwartz, the chairman of Goldman Sach Asia Pacific.

"Going forward, China needs to focus... on having a more sustainable growth model, even if growth rate is a bit lower than it was in the past," said Robert Zoellick, the chairman of Goldman Sachs International Advisors. "This is not going to be a process that's going to be done in a quarter, or year, or two years."

Sustainable growth requires China to enact structural changes, such as developing capital markets, and cultural changes like creating an institutional investment culture, so that "mistakes that inevitably get made can be rectified," said Blankdfein.

Part of that means China needs to create a business culture that can easily recycle failed enterprises.

"If you build a business... that nobody uses, (then) fees don't get paid, if fees don't get paid debt doesn't get serviced, if debt doesn't get serviced the bank takes it over. They plow it over and you move on," he said.

The World Bank has already warned China about the need to reduce the role of government-owned enterprises in the economy, saying it could slow China's growth further.

"It's a real bootstrap problem, it's an execution problem. I'm absolutely convinced that the Chinese leadership knows the problems," Blankfein said.

"That being said, it's a very, very, very difficult undertaking to perform."

China's leadership has proposed reform, but many believe that the changes required are yet to materialize.

"It won't be a smooth, easy run for China - it's never that way for anyone," Blankfein said.

"This could very well be a century where China represents the incremental demand in the world, and all the focus of the world is upon China for the economic support of many many countries, but that doesn't mean every year belongs to China," Blankfein said.

Watch the video on Goldman Sachs.

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