china 2030 executive summay

8/2/2019 China 2030 Executive Summay

1/3

Executive Summary

By any standard, Chinas economic per-ormance over the last three decadeshas been impressive. GDP growth aver-

aged 10 percent a year, and over 500 millionpeople were lited out o poverty. China isnow the worlds largest exporter and manu-acturer, and its second largest economy.

Even i growth moderates, China is likelyto become a high-income economy and theworlds largest economy beore 2030, not-withstanding the act that its per capita

income would still be a raction o the aver-age in advanced economies.

But two questions arise. Can Chinasgrowth rate still be among the highest in theworld even i it slows rom its current pace?And can it maintain this rapid growth withlittle disruption to the world, the environ-ment, and the abric o its own society?

This report answers both questions in thearmative, without downplaying the risks.By 2030, China has the potential to be a mod-ern, harmonious, and creative high-income

society. But achieving this objective will notbe easy. To seize its opportunities, meet itsmany challenges, and realize its developmentvision or 2030, China needs to implement anew development strategy in its next phaseo development. The reorms that launchedChina on its current growth trajectory wereinspired by Deng Xiaoping who played animportant role in building consensus or a

undamental shit in the countrys strategy.Ater more than 30 years o rapid growth,China has reached another turning point inits development path when a second strategic,and no less undamental, shit is called or.The 12th Five Year Plan provides an excellentstart. This report combines its key elementsto design a longer-term strategy that extendsto 2030. More importantly, it ocuses on thehow, not just the what. Six importantmessages emerge rom the analysis:

First, implement structural reorms tostrengthen the oundations or a market-based economy by redening the role o gov-ernment, reorming and restructuring stateenterprises and banks, developing the privatesector, promoting competition, and deepen-ing reorms in the land, labor, and nancialmarkets. As an economy approaches thetechnology rontier and exhausts the poten-tial or acquiring and applying technologyrom abroad, the role o the government

and its relationship to markets and the pri-vate sector need to change undamentally.While providing relatively ewer tangiblepublic goods and services directly, the gov-ernment will need to provide more intan-gible public goods and services like systems,rules, and policies, which increase produc-tion eciency, promote competition, acili-tate specialization, enhance the eiciency

c h i n a 2 0 3 0 xv


2/3

xvi c h i n a 2 0 3 0

o resource allocation, protect the environ-ment, and reduce risks and uncertainties.

In the enterprise sector, the ocus will

need to be urther reorms o state enterprises(including measures to recalibrate the role opublic resources, introduce modern corporategovernance practices including separatingownership rom management, and implementgradual ownership diversication where nec-essary), private sector development and ewerbarriers to entry and exit, and increased com-petition in all sectors, including in strategicand pillar industries. In the nancial sector,it would require commercializing the bankingsystem, gradually allowing interest rates to be

set by market orces, deepening the capitalmarket, and developing the legal and supervi-sory inrastructure to ensure nancial stabil-ity and build the credible oundations or theinternationalization o Chinas nancial sec-tor. In the labor market, China needs to accel-erate phased reorms o the hukou systemto ensure that by 2030 Chinese workers canmove in response to market signals. It alsoneeds to introduce measures to increase labororce participation rates, rethink wage policy,and use social security instruments (pensions,

health, and unemployment insurance) that areportable nationwide. Finally, rural land mar-kets need to be overhauled to protect armerrights and increase eciency o land use, andpolicies or acquisition o rural land or urbanuse must be thoroughly overhauled to preventurban sprawl, reduce local government depen-dency on land-related revenues, and address arequent cause o complaint rom armers.

Second, accelerate the pace o innovationand create an open innovation system in

which competitive pressures encourage Chi-nese irms to engage in product and pro-cess innovation not only through their ownresearch and development but also by par-ticipating in global research and developmentnetworks. China has already introduced arange o initiatives in establishing a researchand development inrastructure and is arahead o most other developing countries. Itspriority going orward is to increase the qual-ity o research and development, rather thanjust quantity. To achieve this, policy makers

will need to ocus on: increasing the techni-cal and cognitive skills o university gradu-ates and building a ew world-class research

universities with strong links to industry; os-tering innovative cities that bring togetherhigh-quality talent, knowledge networks,dynamic rms, and learning institutions, andallow them to interact without restriction;and increasing the availability o patient riskcapital or startup private rms.

Third, seize the opportunity to go greenthrough a mix o market incentives, regula-tions, public investments, industrial policy,and institutional development. Encouraging

green development and increased eciency oresource use is expected to not only improvethe level o well-being and sustain rapidgrowth, but also address Chinas manioldenvironmental challenges. The intention isto encourage new investments in a range olow-pollution, energy- and resource-ecientindustries that would lead to greener develop-ment, spur investments in related upstreamand downstream manuacturing and services,and build international competitive advantagein a global sunrise industry. These policies

have the potential to succeed, given China'smany advantagesits large market size thatwill allow rapid scaling up o successul tech-nologies to achieve economies o scale andreduced unit costs, a high investment rate thatwill permit rapid replacement o old, ine-cient, and environmentally damaging capitalstock; its growing and dynamic private sectorthat will respond to new signals rom govern-ment, provided it gets access to adequate lev-els o nance; and a relatively well-developedresearch and development inrastructure that

can be harnessed to reach and then expandthe green technology rontier.

Fourth, expand opportunities and promotesocial security or allby acilitating equalaccess to jobs, nance, quality social services,and portable social security. These policieswill be critical in reversing rising inequality,helping households manage employment-,health-, and age-related risks, and increasinglabor mobility. Chinas relatively high socialand economic inequality (some dimensions


3/3

e x e c u t i v e s u m m a r y xvii

o which have been increasing) stems in largepart rom large rural-urban dierences inaccess to jobs, key public services, and social

protection. Reversing this trend requiresthree coordinated actions: delivering moreand better quality public services to under-served rural areas and migrant populationsrom early childhood to tertiary educationinstitutions and rom primary health care tocare or the aged; restructuring social secu-rity systems to ensure secure social saetynets; and mobilizing all segments o soci-etypublic and private, government andsocial organizationsto share responsibili-ties in nancing, delivering and monitoring

the delivery o social services.

Fith, strengthen the fscal system by mobi-lizing additional revenues and ensuring localgovernments have adequate inancing tomeet heavy and rising expenditure respon-sibilities. Many o the reorms proposed inthis development strategyenterprise andnancial sector reorms, green development,equality o opportunity or allhave impli-cations or the level and allocation o publicexpenditures. Over the next two decades, the

agenda or strengthening the iscal systemwill involve three key dimensions: mobiliz-ing additional scal resources to meet risingbudgetary demands; reallocating spendingtoward social and environmental objectives;and ensuring that budgetary resources avail-able at dierent levels o government (central,provincial, preectural, county, township,village) are commensurate with expenditureresponsibilities. Without appropriate scalreorms, many o the other reorm elementso the new development strategy would be

dicult to move orward.

Sixth, seek mutually benefcial relations withthe worldby becoming a pro-active stake-holder in the global economy, actively usingmultilateral institutions and rameworks,and shaping the global governance agenda.Chinas integration with the global economyserved it well over the past three decades.By continuing to intensiy its trade, invest-ment, and inancial links with the globaleconomy over the next two decades, China

will be able to benet rom urther special-ization, increased investment opportunitiesand higher returns to capital, and mutually

benecial fow o ideas and knowledge. As akey stakeholder in the global economy, Chinamust remain pro-active in resuscitating thestalled Doha multilateral trade negotiations,advocate open regionalism as a eatureo regional trading arrangements, and sup-port a multilateral agreement on investmentfows. Integrating the Chinese nancial sectorwith the global nancial system, which willinvolve opening the capital account (amongother things), will need to be undertakensteadily and with considerable care, but it will

be a key step toward internationalizing therenminbi as a global reserve currency. Finally,China must play a central role in engag-ing with its partners in multilateral settingsto shape the global governance agenda andaddress pressing global economic issues suchas climate change, global nancial stability,and a more eective international aid archi-tecture that serves the cause o developmentin poor nations less ortunate than China.

* * *

These six priority reorm areas lay outobjectives or the short, medium, and longterm, and policy makers need to sequence thereorms within and across these areas appro-priately to ensure smooth implementationand to reach desired outcomes. A successuloutcome will require strong leadership andcommitment, steady implementation with adetermined will, coordination across minis-tries and agencies, and sensitive yet eectivemanagement o a consultation process that

will ensure public support and participationin the design, implementation, and oversighto the reorm process. And since the globaleconomy is entering a dangerous phaseand China itsel will be transitioning rommiddle-income to high-income status, thegovernment will need to respond to a varietyo risks, shocks, and vulnerabilities as theyarise; in doing so, it must hold ast to theprinciple that policy responses to short-termproblems should uphold, not undermine,long-term reorm priorities.

china 2030 executive summay

Documents