Remarks by Angel Gurría
21 November 2019 - Beijing, People's Republic of China
(As prepared for delivery)
Dear Premier Li:
Thank you for your invitation to the fourth 1 + 6 Roundtable Meeting. Next year marks the 25th anniversary of OECD-China co-operation, and five years since your historic visit to our Headquarters in Paris, where we signed our first Joint Work Programme (JWP). We look forward to finalising our next JWP, which will bring China closer to our best practice international standards. This will be good for China, and good for the world!
The OECD’s November Economic Outlook – which we released today – projects growth to ease to 2.9% in 2019 and barely reach 3% in 2020. This is a steep downgrade from what we expected just six months ago in advanced and emerging economies. They are also the weakest annual growth rates since the global financial crisis in 2008. As we’ve heard from others around the table, trade policy tensions are the main force dragging down the global economy. The accumulation of risks in the financial system – high debts and deteriorating debt quality in particular – is also troublesome.
Governments must coordinate and take action to steer their economies towards stronger, more inclusive and sustainable growth. In advanced economies, this requires a stronger use of fiscal policy, geared towards public investments to seize the opportunities of digitalisation and accelerate the energy transition. Fiscal action should be accompanied by a renewed commitment to structural reform. The OECD’s report, Progress on Structural Reform Under the G20 Enhanced Structural Reform Agenda (ESRA) – which we are releasing today – finds that G20 economies have made insufficient progress in advancing the structural reform agenda endorsed at the G20 Leaders’ Summit in Hangzhou, and must go further.
Let me share three global priorities on trade, markets, and tax to support today’s discussions.
First, halting the build-up of new trade restrictions and restoring predictability for people and businesses.
While tariffs are a big part of the story, trade facilitation also matters. Domestic regulations affecting both goods and services matter even more. For trade to flow freely, regulations must be transparent, non-discriminatory, and proportionate to the objective being pursued. We must address these concerns together, while also tackling new challenges, such as trade in the digital era and the dangerous impacts of trade on the environment. Reducing trade policy uncertainty will facilitate private investment and help revitalise growth prospects, particularly if agreed at the multilateral level.
Second, supporting fair, efficient, and well-governed markets.
The OECD’s international standards – reinforced by our Business for Inclusive Growth Initiative, which I launched with President Macron on the eve of the G7 Biarritz Summit last August – are key to levelling the global playing field.
We are continuing our dialogue with China on combatting bribery and corruption, strengthening corporate governance practices through China’s endorsement of the G20/OECD Principles of Corporate Governance, and elevating responsible business conduct practices.
Moving closer to OECD standards benefits the global economy while also helping China to diffuse tensions, ensure the best practice design of Belt and Road projects, and accelerate the progress of domestic reforms. For example, our recently revised Code of Liberalisation of Capital Movements can support China’s efforts to liberalise its capital flows. We look forward to working with China towards adherence to the revised Codes and our Anti-Bribery Convention, in line with the G20’s call for all Members to endorse these instruments.
Third, delivering a consensus-based global solution to the tax challenges arising from the digitalisation of the economy.
The G20 has mandated the OECD, working through the Inclusive Framework on BEPS, to deliver this solution by the end of 2020. Over 130 countries are working together on an equal footing to reconcile different perspectives, priorities and ideas into a common way forward. Our work on this issue represents multilateralism at its best; it shows what is possible when all countries embrace a spirit of co-operation. We aim to have an agreement on the core structure of the global solution by January, and a final agreement for political endorsement by June 2020. China’s leadership and support for this work is commendable and must continue.
China’s economic outlook.
Turning to China’s economic outlook, GDP growth will moderate to around 5.5 per cent in 2021, as the economy continues rebalancing from investment to consumption-led growth, and trade tensions remain high.
Against the backdrop of slowing investment, our forthcoming 2020 Economic Outlook for Southeast Asia, China and India recommends that China place greater emphasis on the efficiency of investment projects, and let the market play a greater role in allocating resources and pricing of the factors of production. This recommendation is consistent with calls made by the Third Plenum of the 18th Central Committee in 2013.
Tackling current headwinds requires structural reforms that will support growth. For example, import tariff cuts over the past year have lifted per capita GDP growth by 2.5 percentage points over the long-run. An even greater impact is expected from reducing barriers to foreign direct investment: if China reduced FDI restrictiveness to the OECD average level, GDP growth would be boosted by over 10 percentage points in the long run!
As noted in our 2019 Economic Survey of China, efforts to support competitive neutrality should also continue.
Ladies and Gentlemen:
The OECD is proud to partner with China as it seeks to integrate further into the global economy and become a key pillar of the multilateral system. Multilateralism is the only way forward if we want to address the many problems we face, including the climate emergency. It brings all parties to the negotiating table, enhances mutual understanding and supports the development of best practices and international standards that address common global challenges.
The OECD looks forward to keep working with and for China to design, develop and deliver better policies for better lives. Thank you.