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IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Organisation for Economic Coopertation and Development (OECD)

 

Economic Survey of China 2010 [2 February 2010]
http://www.oecd.org/document/43/0,3343,en_2649_34571_44477419_1_1_1_37443,00.html

 

POLICY BRIEF
http://www.oecd.org/dataoecd/22/19/44468723.pdf
[full-text, 12 pages]

 

Summary

Since the OECD’s first Economic Survey of China in 2005, China has continued to

expand rapidly. The economy is also weathering the global crisis remarkably

well, not least thanks to prompt and vigorous macroeconomic policy action.

Economic expansion is projected to continue over the medium run, and

China’s share in the world economy is set to grow further. Despite the recent

decline in the current account surplus, some imbalances remain, notably an

overly high national saving rate, but ongoing reforms can be expected to help

alleviate them over time. Structural reform has continued on a broad front

in recent years, with an increasing focus on the need for social cohesion.

Even so, efforts are under way or still needed in a number of areas to sustain

improvements in living standards over the longer run.

 

Further upgrading the monetary policy framework. China’s monetary policy

framework has gradually become more market-based, with money growth

as the main intermediate target. Going forward, it will need to place less

emphasis on quantity-based liquidity controls and more on interest rate

changes. Allowing greater exchange rate flexibility and putting more weight

on an inflation objective would offer greater scope to tailor monetary policy

to domestic macroeconomic conditions.

 

Continuing financial market opening. Chinese financial institutions are

now generally stronger and better regulated than a few years ago and the

financial system is gradually opening up. However, further reforms are in

order, including raising the ceilings on foreign investment in this sector,

expanding the corporate bond market, creating a formal deposit insurance

system for commercial banks and strengthening supervisory capacity.

Moreover, continued vigilance is called for to avoid a build-up of loans that

may underperform.

 

Lowering product market barriers. Competition is now robust in many

sectors but product market barriers remain high overall, which may hold

back growth over the longer run. Competition and productivity gains can be

boosted by loosening the traditional ties between state-owned enterprises

and central authorities, reducing administrative burdens, allowing greater

private sector involvement in network sectors and lowering barriers to foreign

direct investment in services.

 

Unifying social safety nets. Ambitious reforms have been launched in the

social sphere in recent years and tangible progress has already been achieved,

in particular with respect to education and to the coverage of the social safety

net, albeit with the exception of unofficial migrants. Further progress will

require overcoming the enduring fragmentation of the welfare assistance,

pension and health systems, accompanied by greater fiscal solidarity across

the country.

 

Facilitating labour mobility. The labour market is resilient but segmented.

The registration system and the attendant restrictions on migrants’ access to

social services impede labour mobility and ought to be gradually relaxed.

Consolidating pension regimes. Providing sufficient replacement rates to

pensioners will require shifting more of the cost of pensions, notably those in

the rural areas, to the central government and raising retirement ages.

 

Pushing ahead with health care reform. Progressing towards universal, safe,

affordable and effective basic health care will require that primary care play a

greater role, hospitals be managed more efficiently, changes in some relative

prices, better trained staff and ultimately merging the different insurance

systems.

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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       
E-mail: smb6@cornell.edu                  
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