OECD Economic Surveys: China

English
Frequency
Irregular
ISSN: 
2072-5027 (online)
ISSN: 
2072-5035 (print)
http://dx.doi.org/10.1787/20725027
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OECD's periodic reviews of the Chinese economy.  Each edition examines recent economic developments, policy and prospects, and makes a series of recommendations.
Also available in French
 
OECD Economic Surveys: China 2017

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Author(s):
OECD
21 Mar 2017
Pages:
136
ISBN:
9789264272118 (PDF) ; 9789264272125 (EPUB) ;9789264272101(print)
http://dx.doi.org/10.1787/eco_surveys-chn-2017-en

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China has continued to grow fast by international standards. While growth is gradually moderating as the population ages, GDP per capita remains on course to almost double between 2010 and 2020. As a result, the Chinese economy will remain the major driver of global growth for the foreseeable future. Notwithstanding the economy’s impressive performance and unprecedented poverty reduction, imbalances have built up. China’s growth has long been driven by capital accumulation, supported by high savings. However, the growth model has led to misallocation of capital and falling investment efficiency, and to excess capacity in some manufacturing industries and in the real estate sector. High enterprise investment has been financed by debt, fuelled by interest subsidies and implicit guarantees for state-owned enterprises and other public entities. Slowing growth implies lower profits for firms, and therefore greater pressure to improve efficiency. It also translates into slower growth of incomes and limits the fiscal resources available to make growth more inclusive. Income inequalities measured by the Gini index have declined but are still high. The urban-rural divide is large and the household registration system hinders labour movement to where it could be better used.
This Economic Survey of China assesses the country’s recent macroeconomic performance and proposes policy measures to promote higher-quality growth. Policy recommendations relate to how to improve corporate performance and enhance inclusiveness.
 

SPECIAL FEATURES: BOOSTING FIRM PERFORMANCE AND ENTREPRENEURSHIP; ENHANCING INCLUSIVENESS

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  • Basic statistics of China, 2015

    The Survey was prepared by Margit Molnar, Ben Westmore and Thomas Chalaux, with contributions from Jiangyuan Lu, Wenhao Chen, Baolin Wang and Hyunjeong Hwang, under the supervision of Vincent Koen. Secretarial assistance was provided by Mercedes Burgos and Sisse Nielsen.The Survey was discussed at a meeting of the Economic and Development Review Committee on 23 January 2017, with participation of representatives of the Chinese government. The cut-off date for data and information used in the Survey is 12 March 2017.Empirical analysis in the Survey benefitted from a voluntary contribution from the Government of the Republic of Korea.The Survey is published on the responsibility of the Secretary-General of the OECD.

  • Executive summary

    OECD Economic Projections 100 Database.

  • Assessment and recommendations

    As it enters the 13th Five-Year Plan period (2016-20), the Chinese economy continues to grow fast by international standards. While growth is slowing gradually, GDP per capita remains on course to almost double between 2010 and 2020 (). As a result, the Chinese economy will remain the major driver of global growth for the foreseeable future. Notwithstanding the economy’s impressive performance and unprecedented poverty reduction (Panel C), imbalances have built up. China’s growth has long been driven by capital accumulation, supported by high savings. However, the growth model has led to misallocation of capital and falling investment efficiency, and to excess capacity in some manufacturing industries and in the real estate sector, which needs to be worked off. High enterprise investment was financed by debt, fuelled by interest subsidies and implicit guarantees for SOEs and other public entities. Effectively addressing sources of risk, such as excessive corporate leverage, real estate bubbles and leveraged investment in asset markets will help keep growth on a sustainable path. The authorities may need to forgo some growth in the short run to ensure greater stability over the longer run, with a wider spread of the benefits of growth across society and less stress on a highly polluted environment.

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    • Boosting firm dynamism and performance

      With persisting slower growth worldwide and in China, over-capacity in some heavy industry sectors, declining profitability, and intensifying competition from other, lower-cost emerging economies, corporate behaviour in China needs to change and focus more on efficiency and sustainability. This need is further intensified by mounting environmental pressures and China’s ambition for greener and more sustainable growth. A larger proportion of firms, including state-owned enterprises, should step up innovation efforts and improve corporate governance practices. To this end, supportive policies are needed, fostering an environment that is more conducive to innovation and entrepreneurship, and facilitating resource reallocation through the exit of unviable firms. At the same time, fraudulent corporate practices must be halted and State assets need to be better managed. Reforms are under way or envisaged that will help improve corporate performance and, more broadly, deliver more resilient and environmentally sustainable growth and continuing progress in living standards.

    • Sharing the benefits of growth by providing opportunities to all

      Living standards in China have greatly improved over the past few decades. Both sustained economic growth and an expansion of the social security system have contributed to a sharp reduction in the number of people in poverty. However, urban-rural inequalities remain large and some of the poorest households are being left behind. Further reforms are needed to ensure that the benefits of future growth are shared and that marginalised groups have the opportunity to actively participate in the economy. In particular, policy settings should be adjusted to increase access to good quality education and healthcare for rural and migrant workers and to improve the portability of social security benefits. Changes to the social assistance system that raise work incentives and protect low-income households in poorer locations are also a priority. New spending measures can be funded by adjustments to the tax system which will, in themselves, benefit inclusiveness.

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