In its first Economic Survey of China, the OECD pointed to a number of factors that will fuel China’s rise, such as its vibrant private sector, which produces more than half of its gross domestic product (GDP), and a budget deficit below 1 percent of GDP. It also approved of China’s recent decision to revalue its currency and past efforts to clear up bad debt at state-run policy banks.

But there was also a laundry list of things to be done if China is to maintain its break-neck growth, which averages around 9 percent annually. For instance, the OECD said that although the private sector is developing rapidly, the capital needed to start a company is “relatively high.”

“Priorities in this area should be to revise company law, pass a new bankruptcy code and provide stronger protection for property rights,” the report said.

The OECD also suggested less government control of China’s stock and bond markets, making it easier for companies to raise capital. Currently, the government keeps a tight rein on listings, in part because it has a massive interest in trotting out state-owned firms to investors — often at the expense of private firms that may be more competitive and more efficient using capital.

Other deep-rooted problems noted in the OECD report included a weak banking system, growing disparities between people in the cities and rural areas, a weak pension system that is unlikely to handle the burgeoning population of seniors and low spending on education and health care.

By: DocMemory
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