China in Focus: Lessons and Challenges

 

Released:
16/03/2012
134 pages

   

China in Focus: Lessons and Challenges   gathers analyses conducted by the OECD on China in 2011, together with a selection of more general pieces of work of particular pertinence to China. The objective is twofold: first, to facilitate access for Chinese policy makers and experts to relevant OECD reports, which provide an international perspective on China’s situation and challenges; and second, to enhance the understanding of China’s experience in the broader policy community, in developed as well as developing countries.

 

Today, China and OECD countries face a number of common challenges. Some, like improving international trade and investment regimes, or curbing climate change, have a global dimension and require co-ordinated action, which in turns requires a mutual understanding through policy dialogue.

Others reflect China’s progress towards its goal of becoming a well-off society in an all around way. China now ranks as an upper middle income country with a GDP per-capita closing in on some OECD member countries. The experience of advanced countries, their failures and successes, has thus become even more relevant for China.

 

China’s economic rise has drawn growing attention across OECD countries and beyond, while many of its key policy challenges are increasingly in alignment with OECD priorities. Following a macroeconomic overview (Chapter 1), the report provides an international perspective on two key challenges addressed in the 12th Five-Year Plan for National Economic and Social Development (Chapters 2 and 3): how to ensure development is people-centred, and how to tackle the adverse environmental consequences of rapid economic development. These objectives echo two OECD priorities: how to make growth more inclusive and greener. Chapters 4 and 5 consider how further structural reforms can boost competitiveness, thereby sustaining continued strong growth. Reflecting the importance the Chinese government attaches to education and skills, Chapter 6 discusses ways to strengthen skills to support China’s long term growth and ongoing transformation, including in rural areas. Chapter 7 then examines another dimension of human capital and wellbeing, documenting China’s progress in improving health and, looking ahead, discusses how, like many OECD and other emerging countries, it must address the rise of non-communicable diseases. Chapter 8 reviews China’s strategy for the use of nuclear energy and discusses the possible gains from increased co-operation with the OECD Nuclear Energy Agency. Finally, Chapter 9 takes a step back on the Chinese economic transformation and experience with poverty reduction and draws conclusions for aid policies.

 

 Table of contents

 

Chapter 1: Macroeconomic Overview

The macroeconomic overview contained in this volume notes the continued strong performance of the economy against the backdrop of continued weakness in many other parts of the global economy. Rebalancing of the economy is underway, as demonstrated by the substantial reduction in the current account surplus. It discusses the government’s responses to the global economic slowdown and identifies the property sector as a considerable source of risk. It also discusses how reforms towards a more market-oriented monetary policy, and a more flexible exchange rate regime could help the economy better absorb shocks, thereby promoting greater macroeconomic and financial stability. This overview chapter also points to the importance of fiscal policy reform to support the ambitious social objectives of the 12th Five-Year Plan.

 

Chapter 2. Inequality: Recent Trends in China and Experience in the OECD Area

Chapter 2 analyses inequality trends in China and discusses how an effective tax and transfer system, appropriate labour and product market regulations as well as sound education and fi nancial sector policies, can all help reduce inequality. It shows the strong complementarities between a number of policies that can directly reduce inequality and strengthen growth.

 

Chapter 3. Key Lessons from OECD Work on Greening Growth

Chapter 3 draws on the OECD’s work on green growth, and discusses how countries can design a green growth strategy adapted to the local context. In China, as in many other developing countries, environmental pollution has been sometimes seen by local actors as the price to pay for development. But the rising pollution is generating mounting costs, not least for human health, and social tensions. The government has taken a number of important steps to improve the environment. The green growth path provides an opportunity for China to leapfrog unsustainable and wasteful production and consumption patterns. Moreover, as argued in Chapter 1, there are complementarities to be exploited between reforms that will aid environmental and broader economic rebalancing, notably through the shift away from construction and manufacturing towards the service sector.

 

Chapter 4. China’s 10 Years in the WTO: Sustaining Openness-based Growth into the Future

Chapter 4 looks back at the wide-ranging structural reforms implemented since China’s accession to the WTO 10 years ago, and recalls how the participation in global trade networks and global value chains (GVCs) has been pivotal to China’s economic success. It shows that China could gain further additional benefits from further opening up by removing remaining pockets of border and behind-the-border protection, continued reforms of the state-owned entreprises sector and of the agriculture sector, as well as rethinking its approach to trade of raw materials. Regulatory reform and increased competition in services sectors can also contribute to the development of the services sector and help lift overall productivity.

 

Chapter 5. Moving up the Value Chain: China’s Experience and Future Prospects

Chapter 5 takes a closer look at China’s role within GVCs as the “World’s Factory”, examining the importance of “processing trade”, and exploring the role played by imported intermediate inputs in China’s relatively sophisticated exports. It pays special attention to China’s value-added GVC activity by presenting some of the latest findings by the OECD on the mapping of GVCs. The chapter also emphasises the necessity of strong technological capabilities in developing high quality, innovative products, and the accumulation of other strengths such as intellectual property, human capital and organisational assets, often summarised as intangible assets.

 

Chapter 6. Measuring Skills to Support Economic Transformation

Chapter 6 presents the results from OECD work to support countries in their effort to formulate sound skills policies. It provides guidelines not only regarding which kind of information is needed to evaluate current supply and demand of skills, skills match and outcomes in investment in skills, but also discusses how to design policies that will make the most of existing skills to foster development.

 

Chapter 7. Health Care in China: Recent Trends and Policy Challenges

Chapter 7 recalls the considerable progress in improving health outcomes and health care coverage and access, with the life expectancy today being similar to the one observed for several OECD countries. Today, China is setting the bases for tomorrow’s healthcare and insurance systems, and can, in this process, benefit from the dialogue with OECD countries and OECD’s systematic data collection and analysis of health systems. With the decline in infectious diseases, chronic diseases have become the major health challenge in China. The experience of OECD countries, which have been confronted with this challenge for a longer period of time, shows the importance of prevention, screening and treatment in primary care. Better aligning China’s health and insurance systems towards interventions in primary care settings, such as screening for hypertension and diabetes and effective treatment, would improve cost-effectiveness, and provide more flexible treatment options. In addition, while China has been successful in expanding hard infrastructure in the health system, many aspects of soft infrastructure, such as hospital management and financing as well as training of medical staff, need further reform.

 

Chapter 8. Nuclear Energy in China: Views and Prospects from the OECD Nuclear
Energy Agency’s Perspective

Reflecting its strong economic growth, China’s demand for energy has increased rapidly over the years. Both to limit the environmental impact of its energy consumption, and to develop domestic alternatives to coal, China has adopted a very ambitious plan for the development of its nuclear energy capacity. As in  other countries, the Fukushima-Daiichi accident has raised concerns regarding the safety of nuclear plants, leading to a revision of safety regulations and a focus on deploying advanced technology reactors, which offer improved safety features. Chapter 8 provides a description of China’s nuclear energy program and outlines the possible benefits China could gain from increased co-operation with the OECD Nuclear Energy Agency.

 

Chapter 9. Economic Transformation and Poverty Reduction: How it Happened in China, Helping it Happen in Africa

Chapter 9 looks at China’s exceptional record in addressing poverty, through a rapid economic transformation from a poor, rural-based country to a middle income one. It summarises the work conducted by the China-DAC Study Group, established by the Development Assistance Committee (DAC), OECD’s network of donors, and by the International Poverty Reduction Centre in China (IPRCC), and with the active participation of several African countries. It highlights the important role played by the Chinese government in guiding economic and social development, through planning and budgeting, performance-based public management, policy research and innovative experiments. It also emphasises how China was able to make the most of foreign investment and aid, by incorporating these with its own development strategies. China’s experience is an important reference for other developing and emerging countries, and its active participation in the recently signed Busan Partnership for Effective Development Co-operation is an important asset both for other donors and developing countries.

 

China in Focus: Lessons and Challenges

 

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