The Chinese economy will remain the major driver of global growth for the foreseeable future.

1. www.oecd.org/eco/surveys/economic-survey-china.htm
OECD
OECD Economics
2017 OECD ECONOMIC
SURVEY OF CHINA
More resilient and inclusive growth
Beijing, 21 March 2017

2. • 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.
2
Main messages

3. 3Source: OECD Economic Outlook Database.
Real GDP growth
China remains
the major driver of global growth

4. Investment is slowing
4
Source: National Bureau of Statistics.

5. Rebalancing from industry to services
is underway
5Source: National Bureau of Statistics.
Share of industry and services in GDP

6. The saving rate is still very high
6
Source: National Bureau of Statistics.
Saving rate of households and non-financial enterprises, % of GNI

7. The poverty rate has declined dramatically
7
Source: National Bureau of Statistics.
Rural poverty rate

8. Income inequality has declined due to strong
income growth in the middle of the distribution
8
Source: National Bureau of Statistics.
Gini coefficient

9. The poorest are falling further behind in
rural areas
9
Source: National Bureau of Statistics.
Disposable income of the top 20%
over that of the bottom 20% of the income distribution

10. Boosting firm dynamism
10

11. Barriers to entrepreneurship have fallen
11
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

12. Bankruptcies are very rare
12
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.

13. 13
Insolvency procedures can be improved
Source: World Bank Doing Business 2017 database.

14. R&D spending is high
14
Note: Latest year available.
Source: OECD MSTI database.
R&D spending as a share of GDP

15. Public funds for innovation are
concentrated
15
Source: National Bureau of Statistics.
Share of government support for innovation in the total, 2015
• Spread government support for innovation across more sectors.

16. Patent use varies across provinces
16
Share of effective patents used in production and put on the market
and number of patents, 2014
Source: State Intellectual Property Office.

17. The number of listed firms is on the rise
17
Source: CSRC.

18. Corporate governance needs to be improved
18
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.

19. Ownership concentration declined
somewhat
19
Source: CSRC.

20. Most enterprise debt is from SOEs
20
Source: Bank of International Settlements and Ministry of Finance.
Enterprise debt over GDP
• Gradually remove implicit guarantees to SOEs and other public entities.

21. Key recommendations to increase the
quality and resilience of growth
21
• 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.

22. Addressing financial risks
22

23. Mortgage lending soared
23
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.

24. Housing prices have surged
24
Source: National Bureau of Statistics.
Growth of housing prices by city tier, y-o-y

25. Enterprises are heavily indebted
25
Source: Bank of International Settlements.
Enterprise debt as a share of GDP

26. NPLs are rising
26
Source: China Banking Regulatory Commission.
Share of problem loans in total

27. Key recommendations
to address financial risks
27
• 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.

28. Providing opportunities to all
28

29. The tax and transfer system
does little for redistribution
29
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.

30. Sub-national governments have too little
own revenue
30
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.

31. Student performance is highly influenced
by socioeconomic factors
31
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.

32. Healthcare is less available in rural areas
32
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.

33. The Meals in Schools Programme
33
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.

34. The retirement age is low
34
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.

35. Key recommendations for sharing the benefits
of growth by providing opportunities to all
35
• 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.

36. Environmental taxation is low
36
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.

37. Key recommendations
to make growth greener
37
• 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.

38. More information…
www.oecd.org/eco/surveys/economic-survey-china.htm
OECD
OECD Economics
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38
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