Productivity and long term growth
Going for Growth 2014: China
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China has shown strong resilience during the crisis, maintaining overall high growth rates, even though the pace has been decelerating since 2011. Key policy challenges for sustainable and balanced growth include facilitating the allocation of resources to the most productive sectors, broadening the access to quality education and enhancing competition through further product market liberalisation.
Previous Going for Growth recommendations include:
- Open new sectors to investment by private enterprises, especially network industries currently dominated by large state-owned enterprises.
- Enhance equal access to upper-secondary education across regions and within urban area and allow children to attend upper-secondary school in their place of residence.
- Ease government control over financial markets such as allowing larger room for market-based setting of interest rate and for cross-borders portfolio investments.
- Reduce barriers to labour mobility by disconnecting the provision of local public services and intra-governmental transfers from registration status of residents in the cities.
- Further enhance the rule of law to reduce legal uncertainty and improve business environment.
- The comprehensive reform plan announced in November 2013 seeks to address many of the key challenges. Notable reforms in these areas over the past two years include:
- Since the new administration took office, a substantial number of product market regulations were abolished or delegated from central to local governments.
- Incremental reforms that enhance the functioning of financial markets such as the introduction of the prime rate and of certificates of deposit have taken place.
The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, rebalancing the current account and reducing income inequality). In the case of China, broadening access to quality education across the country and strengthening migrants’ social protection would help reduce income inequalities.