Productivity and long term growth

Going for Growth 2018 - China note


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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year -- in both advanced and emerging economies -- on policy priorities identified in the previous issue of Going for Growth.

Country highlights

GDP per capita continues to catch up with that of the upper half of OECD, though the “New Normal” – which puts more emphasis on the quality of growth – implies a slower catch-up. The income gap reflects lower output per worker as labour force participation rates are above those in OECD countries. Income inequality is trending down as the middle class expands but remains well above the OECD average.
In line with recent reforms introducing market mechanisms in various areas, the licensing and registration system should be further streamlined. Implicit state guarantees to public entities should be phased out and the rule of law enhanced to create a more level playing field for all enterprises, which would lead to efficiency gains. A minimum standard of public services should also be provided all over the country to lay the ground for more equal opportunities and reduce income inequalities. Abolishing the household registration system would promote social inclusion and deliver further productivity gains.

Going for Growth 2017 recommendations include:

  • Reduce administrative burden on start-ups and encourage private entry by further streamlining the system governing licenses and fees. Move towards a “one-stop-shop” model of business registration. Ensure country-wide implementation of reform measures. Open up more sectors to private and foreign entry to ensure efficiency-enhancing competition. 
  • Ensure a better match between skills available and those demanded in the market by introducing new programmes and review curricula, textbooks as well as criteria for establishing the number of students that can be admitted to existing programmes. Make vocational education more attractive at all levels by hiring qualified teachers and improving the reputation of such programmes. Streamline licensing procedures for various qualifications and ensure minimum standards. 
  • Strike a better balance between liberalisation and regulation in financial markets by removing implicit state guarantees to public entities to enhance risk pricing by financial markets. Enhance financial literacy through financial education from an early age. 
  • Reduce barriers to labour mobility and strengthen social security and public service provision by ensuring equal education for all, regardless of registration status. Unify healthcare insurance at the national level so that services can be obtained country-wide. Establish a minimum standard of public services all over the country to avoid overcrowding in the largest cities. 
  • Enhance the rule of law by making annual enterprise reports publicly available to reduce the scope for misleading advertising and fraud. Stiffen sanctions for forging documents, violations of disclosure requirements and other unlawful business conduct.

Recent policy actions in these areas include:

  • Healthcare insurance has been unified as 361 regions (96% of the total) and 8624 cross-regional medical institutions are now linked to the nationwide settlement system for medical expenses. This will improve the utilisation of health services by migrant workers and reduce the time between when health costs are incurred and reimbursed.
  • The rule of law has been slightly reinforced as the government announced random inspections as a means to strengthen supervision of reporting, direct sales, distribution chain activities and consumer protection in general.

China: Latest Economic Forecast 

China: Latest Economic Survey


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