China’s economic prospects: OECD analysis and recommendations

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Vincent Koen (OECD), Margit Molnar (OECD), Albert Park (HKUST), Sandra Poncet (CEFC Hong Kong)
24 Mar 2017 (Friday)
4:00 - 6:00 pm
Room Segalen, Consulate General of France in Hong Kong and Macao

Event video recording and Presentation Slides

Vincent Koen: Macroeconomic Prospects, Policies and Risks for China

View his presentation slides here

Margit Molnar: More Resilient and Inclusive Growth for China

View her presentation slides here

Albert Park: Comments on the OECD Economic Surveys of China 2017

View his presentation slides here

Sandra Poncet: Comments on the OECD Economic Surveys of China 2017

Key insights

The OECD launches its new 2017 Economic Survey of China at an event cosponsored by IEMS and the French Centre for Research on Contemporary China (CEFC). In the report, OECD economists assess attempts to reinvigorate the country’s economy in light of slowing growth. Last conducted in 2015, the report also gives policy recommendations for achieving higher-quality growth. This year’s recommendations center around supporting innovation and reforming China’s massive state-owned sector. The report also argues that a shift away from energy-intensive production is needed for sustainable growth, with sustainability a key goal of the government’s most recent five-year plan. In addition, the study finds room for improvement in China’s education, healthcare and pension systems. Finally, better social security and a tougher tax schedule is needed for social inclusiveness. 

Margit Molnar, OECD’s Chief China Economist, finds it surprising that despite more investment in innovation, rising research output is having less impact on productivity. The failure to convert research efforts into commercially-viable activity comes at a time when China is spending around 2% of GDP on R&D – far more than comparable developing countries but still short of the US or Japan. Molnar suspects the divergence is caused by a lack of quality and relevance in new patents. Speaking of her findings on patenting activity in China, Molnar remarks that “the utilization rate [of new patents] is relatively low especially in the case of patents registered by universities or research institutes, it’s much lower than in other countries.” Speculating as to why, Molnar adds that “the [university’s] performance evaluation system” encourages researchers to “register a large number of patents” with little attention paid to whether those patents are eventually commercialized. 

When asked for key recommendations, Vincent Koen, OECD’s Head of Division, cautions that “there’s not one single, silver bullet for China.” Koen believes that the protection of intellectual property rights needs strengthening – “fraudulent behavior has to be prosecuted more and more forcefully.” Additionally, Koen remarks that there is “room for considerable improvement for SOE’s corporate governance.” Meanwhile, Koen suggests tax reform, to make the tax schedule “more redistributive.” “Inequality is high in China, and the social security contributions setup, and the personal income taxation set-up, and the property taxation setup are not adequate to mitigate inequalities.” Koen also suggests that China’s retirement age, and hence pensionable age, needs to be raised. “People in China retire at a ridiculously young age. The life expectancy in good health increases, but they still stop working at 55 for women or 60 for men, which is too young.” Koen was also skeptical of China’s Hukou residential registration system, commenting that reform “has to be pushed further.” Finally, Koen highlights recommendations from the study for green growth and the enforcement of environmental legislation.

Organizers

The French Centre for Research on Contemporary China (CEFC) in collaboration with The Organisation for Economic Co-operation and Development (OECD) HKUST Institute for Emerging Market Studies

Speakers

Vincent Koen, Head of Division, OECD Economics Department Country Studies.
Margit Molnar, Chief China Economist, OECD Economics Department.

Discussants

Albert Park, Director, Institute for Emerging Market Studies, Hong Kong University of Science and Technology (HKUST IEMS)

Sandra Poncet, CEFC Hong Kong

Synopsis

The 2017 OECD Economic Survey of China assesses the country’s recent macroeconomic performance and proposes policy measures to promote higher-quality growth. Improving corporate performance by boosting innovation activities and entrepreneurship, enhancing the standards of corporate governance and reforming state-owned enterprises by exposing them more to market mechanisms would raise efficiency and boost household incomes, increase employment opportunities and raise people’s overall well-being. Moving to less energy-intensive production is also key to achieve greener and more sustainable growth. Greater redistribution through the tax-and-transfer system and better targeting of social assistance would enhance inclusiveness. At the same time, inequalities in access to education, healthcare and pensions need to be addressed.

Sandra Poncet will chair the seminar

This seminar will be held in English.

Contact: Henry Wu cefc_AT_cefc.com.hk / tel: +852 2876 6910

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