Click to READ
China’s economy expanded rapidly in recent years despite a dire international context, though it slowed in 2011-12. Rebalancing has made headway: externally, the current account surplus has fallen sharply, from over 10% of GDP in 2007 to under 3%; domestically, growth has lately been pulled more by consumption than by investment. With the slowdown, inflation has been brought under control. More recently, activity has regained momentum, helped by policy easing and a pick-up in infrastructure spending, but the global economic context remains fragile. If needed, there is room for further cautious monetary and fiscal stimulus. In a longer-run perspective, China has now overtaken the euro area and is on course to become the world’s largest economy around 2016, after allowing for price differences. Living standards will continue to improve fast provided reforms are implemented.
Financial sector reform. Gradually, market-based financial instruments and interest rates are playing a greater role, the renminbi is being used more across borders and the restrictions on capital inflows and outflows are being eased. Continued progress in this direction will support growth.
Competition and innovation. Competition is generally intensifying, boosting productivity, but state ownership needs to be reduced in some sectors, reform needs to be started in others, and the state should pull out of non-core sectors. Publicly-funded R&D should focus more on fundamental research. The intellectual property rights of innovators, domestic and foreign, should be strengthened further.
Inclusive urbanisation. Close to a quarter of the population now lives in cities where income per capita is as high as in some OECD countries. Migration from the countryside to cities, and out of agriculture into higher-productivity industry and services, will continue to fuel growth but also brings many challenges. In particular, sufficient land must be made available for the expansion of larger and more productive cities and to meet the demand for more living space. This will help avoid renewed overheating in the real estate sector and improve wellbeing. Farmers need to be given the same property rights as urban dwellers and allowed to develop, or sell for development, the land for which they have user rights. Internal migrants need to be given the same access to public services as registered urban residents. This is notably the case for education, all the way from primary school to university, and for health care.
Relations between levels of government. Providing adequate basic public services across the country is essential to improve wellbeing nationwide. This calls for a greater portion of transfers to provinces, prefectures or counties to go to lower-income areas.
Greening growth. Some forms of pollution are declining but air and water quality are often poor, imposing sizeable costs. Going forward a broad policy mix is needed to help meet environmental goals in a cost effective manner, including well implemented market-based approaches and better enforcement of existing regulations. To further encourage progress in the efficient use of energy, taxation of diesel and gasoline ought to be raised, while the price of electricity, coal, gas and water needs to better reflect costs. Large ongoing investment in renewable energy should be better harnessed. Continuing to move towards pollution taxes and carbon pricing is also key. So is further lifting standards for motor vehicle emissions and fuel quality. Progress in improving enforcement and information dissemination needs to be built on while targets should be set for a broader range of environmental objectives.
The complete edition of the Economic Survey of China is available from:
For further information please contact the China Desk at the OECD Economics Department at firstname.lastname@example.org.
The OECD Secretariat's report was prepared by Richard Herd, Samuel Hill and Wang Xiao under the supervision of Vincent Koen. Research assistance was provided by Thomas Chalaux.
Bookmark this page : www.oecd.org/eco/surveys/china-2013.htm