china 2017 oecd economic survey more resilient and inclusive growth
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www.oecd.org/eco/surveys/economic-survey-china.htm
OECDOECD Economics
2017 OECD ECONOMIC SURVEY OF CHINA
More resilient and inclusive growth
Beijing, 21 March 2017
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• Growth has slowed somewhat but remains strong.• China will remain the major driver of global growth.• Financial risks from high corporate debt are rising and
need to be addressed urgently.• Innovation and entrepreneurship should contribute more
to productivity growth.• Streamlining the social assistance system and the
distribution of resources in education and health would enhance inclusiveness.
Main messages
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3Source: OECD Economic Outlook Database.
Real GDP growth
China remains the major driver of global growth
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Investment is slowing
Source: National Bureau of Statistics.
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Rebalancing from industry to services is underway
Source: National Bureau of Statistics.
Share of industry and services in GDP
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The saving rate is still very high
Source: National Bureau of Statistics.
Saving rate of households and non-financial enterprises, % of GNI
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The poverty rate has declined dramatically
Source: National Bureau of Statistics.
Rural poverty rate
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Income inequality has declined due to strong income growth in the middle of the distribution
Source: National Bureau of Statistics.
Gini coefficient
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The poorest are falling further behind in rural areas
Source: National Bureau of Statistics.
Disposable income of the top 20% over that of the bottom 20% of the income distribution
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Boosting firm dynamism
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Barriers to entrepreneurship have fallen
Note: The value of the indicator ranges from 0 to 6, with 6 being the most restrictive.Source: OECD Product Market Regulation database and authors’ calculation.
Barriers to entrepreneurship, PMR indicator, 2013 and 2016
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Bankruptcies are very rare
Source: State Administration of Industry and Commerce.
The share of firms exiting through bankruptcy in total exits
• Accelerate the bankruptcy process to reduce uncertainty and compensate the laid-off in accordance with relevant laws.
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Insolvency procedures can be improved
Source: World Bank Doing Business 2017 database.
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R&D spending is high
Note: Latest year available.Source: OECD MSTI database.
R&D spending as a share of GDP
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Public funds for innovation are concentrated
Source: National Bureau of Statistics.
Share of government support for innovation in the total, 2015
• Spread government support for innovation across more sectors.
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Patent use varies across provinces
Share of effective patents used in production and put on the market and number of patents, 2014
Source: State Intellectual Property Office.
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The number of listed firms is on the rise
Source: CSRC.
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Corporate governance needs to be improved
Source: China Stock Market & Accounting Research database.
Percentage of firms with more independent directors than required by law
• Strengthen the independence and decision-making role of the board by hiring truly independent directors.
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Ownership concentration declined somewhat
Source: CSRC.
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Most enterprise debt is from SOEs
Source: Bank of International Settlements and Ministry of Finance.
Enterprise debt over GDP
• Gradually remove implicit guarantees to SOEs and other public entities.
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Key recommendations to increase the quality and resilience of growth
• Require the regular publication of company accounts and enhance disclosure standards for all firms. Raise penalties for individuals committing fraud.
• Spread government support for innovation across more sectors. • Strengthen intellectual property right protection by more
systematically prosecuting violators and raising fines.
• Gradually remove implicit guarantees to SOEs and other public entities. • Professionalise the management of SOEs to make a clear division
between business and politics. • Strengthen the independence and decision-making role of the board by
hiring truly independent directors.
• Accelerate the bankruptcy process to reduce uncertainty and compensate the laid-off in accordance with relevant laws.
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Addressing financial risks
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Mortgage lending soared
Source: People’s Bank of China.
Growth of the stock of mortgage loans outstanding, y-o-y
• Enhance prudential regulation by requiring lenders to take into account borrowers’ repayment ability when extending loans.
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Housing prices have surged
Source: National Bureau of Statistics.
Growth of housing prices by city tier, y-o-y
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Enterprises are heavily indebted
Source: Bank of International Settlements.
Enterprise debt as a share of GDP
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NPLs are rising
Source: China Banking Regulatory Commission.
Share of problem loans in total
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Key recommendations to address financial risks
• Conduct a prudent fiscal policy. Channel funds to where returns are high such as education, health and social security and avoid misallocation of capital by allowing banks to better price risks.
• Improve the quality, coverage and timeliness of fiscal reporting.
• Enhance prudential regulation by requiring lenders to take into account borrowers’ repayment ability when extending loans.
• Restrict leveraged investment in asset markets.
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Providing opportunities to all
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The tax and transfer system does little for redistribution
Reduction in market income inequality due to taxes and transfers
Source: Standardised World Income Inequality Database (SWIID) Version 5.1.
• Broaden the personal income tax base and increase tax progressivity.
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Sub-national governments have too little own revenue
Source: Ministry of Finance.
Shares of revenues and spending in total by government level, 2015
• Increase central and provincial government social assistance transfers to poorer areas.
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Student performance is highly influenced by socioeconomic factors
Impact on PISA score of a one unit increase in economic, social and cultural status, 2015
Note: This is based on the PISA index of economic, social and cultural status. Source: OECD.
• Increase public funding for childcare and introduce incentives to encourage the participation of migrant children and those in rural areas in early childhood education.
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Healthcare is less available in rural areas
Ratio of health professionals per resident between urban and rural areas, 2015
Source: National Bureau of Statistics.
• Raise doctor salaries by allowing doctors to provide fee-based medical services in public hospitals outside of their standard work.
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The Meals in Schools Programme
Digitalisation of the Meals in Schools Programme
Source: China Development Research Foundation, National Bureau of Statistics.
Note: The government plan to provide free school meals for students in poverty-stricken areas has been enhanced in some locations by a China Development Research Foundation initiative using mobile phone technology to share and monitor the programme.
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The retirement age is low
Source: OECD (2016), Pensions at a Glance.
Normal pension age, 2015
• Gradually increase and unify the pension age to 65 and then index it to life expectancy.
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Key recommendations for sharing the benefits of growth by providing opportunities to all
• Gradually increase and unify the pension age to 65 and then index it to life expectancy.
• Improve administrative procedures to make it easier to draw a pension in a different location from where it is earned.
• Increase public funding for childcare and introduce incentives to encourage the participation of migrant children and those in rural areas in early childhood education.
• Raise doctor salaries by allowing doctors to provide fee-based medical services in public hospitals outside of their standard work.
• Base social security contributions on actual income earned. • Increase central and provincial government social assistance transfers to
poorer areas. • Broaden the personal income tax base and increase tax progressivity.• Implement a broad-based nationwide recurrent property tax and consider
an inheritance tax that would include some basic inheritance allowance.
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Environmental taxation is low
Environmental taxes as a percentage of GDP, 2014
Source: OECD Environmental Policy database.
• Effectively implement the December 2016 Environmental Protection Tax Law, stepping up enforcement efforts and raising environmental taxes.
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Key recommendations to make growth greener
• Effectively implement the December 2016 Environmental Protection Tax Law, stepping up enforcement efforts and raising environmental taxes.
• Allow independent renewable generators to sell surplus energy and link renewable capacity expansion with the extension of the local power grid.
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More information…
www.oecd.org/eco/surveys/economic-survey-china.htm
OECD
OECD Economics
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