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2006 OECD Economic Outlook, Volume 2006 Issue 1

image of OECD Economic Outlook, Volume 2006 Issue 1
OECD's twice-yearly assessment of the major economic trends and policies in member countries and selected non-members. This issue covers the outlook to the end of 2007.  Together with a wide range of cross-country statistics, the Outlook provides a unique tool to keep abreast of world economic developments. This issue also contains a special chapter on Future Budget Pressures Arising from Spending on Health and Long-Term Care.

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China

The economy has continued to grow very rapidly, with GDP expanding by close to 10% in 2005.  Demand is being sustained by further increases in exports and investment, underpinned by strong corporate profitability. Consumer price inflation declined to 2%, as increases in world oil prices were not passed on to users. Import growth slackened, bringing a marked increase in the current account surplus to over 6% of GDP. With fiscal and monetary policies close to neutral, and only a modest appreciation of the currency, robust growth of about 10% should continue. In this context, the current account surplus may decline only slightly relative to GDP. The new budget puts great emphasis on improving public services in rural areas, yet the expenditure implications appear to be relatively modest and the fiscal deficit remains low. More shares of state-owned listed companies can now be traded, improving the functioning of the capital market, but there is a need for more private companies to be allowed to list. Greater use should be made of interest rates to stabilise demand and to reduce the reliance on non-market quantitative lending controls, and this will require freer movement of the exchange rate.

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