Introductory Remarks by Angel Gurría, OECD Secretary-General, meeting with the Central Party School
Beijing, China, Saturday 22 March
Ladies and Gentlemen,
I would like to thank you for inviting me to participate in this roundtable on inclusive growth. Through our Inclusive Growth Initiative, the OECD has played a leading role in advancing the debate on this agenda. It will be a key theme of the 2014 OECD Ministerial Meeting, and I welcome the opportunity to share our experiences with you at the Central Party School today.
Economic growth in China has lifted millions of people out of poverty. In the past years, real national income rose at an annual average rate of 8.6% , and the number of people living in absolute poverty fell to 82.5 million in 2013. The income gap with the developed world has shrunk, and China has taken its place at the head of a growing group of middle-income countries.
This is a triumph of spectacular proportions. But, whilst recognising China’s undoubted successes in this area, we must also observe that the long-standing idea that “the tide of growth lifts all boats” is no longer a universal truth.
Inequality is an increasingly prominent issue around the world. In 2010 the average income of the richest 10% in OECD countries was 9.5 times higher than that of the poorest 10%, the highest it has been in some 30 years.
In China, the Gini coefficient – a conventional measure of inequality – increased rapidly up until the late 2000s. Although we have seen a gradual reversal over the past few years, it remains relatively high, at 0.47,which is well above the OECD average of 0.32 and it is on a par with those of Chile, Mexico and Turkey, which are the most unequal countries in the OECD area.
Economic growth and development nearly always come with some level of inequality. But, policymakers must ensure that such inequalities are transitory, not accompanied by a loss of social mobility, and are not detrimental to economic growth itself.
We also need to recognise that inequality is not an income-only issue. Rather, it affects many areas of people’s lives which are essential for their well-being. Concerning health outcomes, for instance, evidence from fifteen OECD countries has shown that richer, better-educated students can expect to live longer than their poorer, less well-educated peers .
The OECD’s approach to Inclusive Growth is precisely about recognising the multi-dimensional nature of inequality, going beyond income to include employment and health outcomes, in order to understand how well off people really are. It also emphasises the distributional element, so that the effects of policies can be gauged for different social groups, such as the poor or the median-household. In doing so, our approach recognises that people are different, that there is no single “representative agent” – as economists like to call them – and that policies affect different social groups differently.
Finally, our approach is policy relevant and actionable; allowing policy makers to identify, analyse and exploit synergies among policies and to take compensatory action when trade-offs are present.
This approach has generated a lot of interest in OECD countries, and it can also be of immense value to a partner country like China.
In fact, China has already recognised the importance of a multi-dimensional approach to tackling increasing social inequalities. In the 12th Five Year Plan (FYP), you have prioritised the improved provision of basic public services and the implementation of effective institutional reforms to reinforce efficiency and equity objectives. It is essential to ensure that these efforts are maintained in order to build upon the improvement in income distribution we have already seen in the past five years.
Of course, in spite of your achievements, significant challenges remain for China. In our brochure we have highlighted a number of areas where policies can be improved in order to secure inclusive growth, and ensure that the proceeds of economic progress are more equitably distributed.
I would like to share a few of these policy recommendations with you here today.
Firstly, we have highlighted the need for China to ensure that its service sector and energy distribution are opened to more competition, which will boost Inclusive Growth by increasing access to jobs and services.
Secondly, we call upon China to further ease restrictions on inward foreign direct investment, so as to allow all parts of the population to share the benefits of an inflow of foreign capital.
And finally, we believe that China should gear future policies towards giving all urban residents equal access to public services, which will enhance equity in important areas like education and healthcare, whilst also boosting growth over the long term.
By initiating this discussion at the Central Party School today and by putting inclusiveness objectives at the heart of the 12th FYP you, as the present and future leaders of China, have shown that you understand the gravity of the problems posed by rising inequality. In addition, you have shown that you have the political and economic acumen necessary to face them head-on.
Looking ahead, I have the utmost confidence that China, together with its international partners in the OECD, can ensure that the benefits of economic growth around the world are more widely and sustainably spread.
The OECD stands ready to bring its experience to the table and I look forward to engaging in a lively and enlightening discussion with you this morning. Thank you.
The OECD Secretary-General in Beijing, 21-24 March 2014