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Discussion of 2017 china economic survey by Margit Molnar(OECD)
The OECD Economic Survey of China highlights improvements in firm dynamism, such as declining barriers to entrepreneurship, high R&D spending, and a soaring number of patents. However, it emphasizes challenges like corporate governance issues, high SOE leverage, and increasing income inequality, particularly in rural areas. Key recommendations include enhancing intellectual property protections, broadening the tax base, and improving access to education and healthcare for underserved populations.
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Discussion of 2017 china economic survey by Margit Molnar(OECD)
- 1. www.oecd.org/eco/surveys/economic-survey-china.htm OECD OECD Economics 2017 OECDECONOMIC SURVEY OF CHINA More resilient and inclusive growth French Centre for Research on Contemporary China Hong Kong, 24 March 2017
- 2. BOOSTING FIRM DYNAMISMAND PERFORMANCE
- 3. 1.1. Barriers toentrepreneurship have fallen 3 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
- 4. 1.2. Bankruptcies arevery rare 4 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.
- 5. 1.3. R&D spendingis high 5 Note: Latest year available. Source: OECD MSTI database. R&D spending as a share of GDP
- 6. 1.4. Public fundsfor innovation are concentrated 6 Source: National Bureau of Statistics. Share of government support for innovation in the total, 2015 • Spread government support for innovation across more sectors.
- 7. 1.5. The numberof patents is soaring 2015 China No. 1 – Over 1/3 of the global number – Overtook the US However: • the elasticity of patenting with respect to R&D spending is small • The impact of new patents on productivity has declined • Quality and relevance issues 7
- 8. – The shareof invention patents is low – Share of triadic patents (registered in the US/EU/Japan) low, though in absolute terms China is No. 3 in the world and registered 18% of all in 2016 8 1.6. Quality Source: OECD MSTI database (2016).
- 9. • Utilisation rateis low, in particular for patents registered by universities/research institutions Patents cannot fully capture innovation output – Firms often do not apply for patents, 2/3 think patent right cannot effectively protect their inventions, 18% experienced violation of patent rights reap first-mover advantage by quickly marketing their invention, sign confidentiality agreement with staff, change products quickly so that competitors cannot catch up 9 1.7. Relevance
- 10. 10 1.8. New productsmake up a substantial part of revenue in some high-tech industries Source: National Bureau of Statistics. • Made in China 2025 • Internet Plus
- 11. 1.9. The numberof listed firms is on the rise 11 Source: CSRC.
- 12. 1.10. Corporate governanceneeds to be improved 12 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.
- 13. 1.11. Ownership concentrationdeclined somewhat 13 Source: CSRC.
- 14. 1.12. Most enterprisedebt is from SOEs 14 Source: Bank of International Settlements and Ministry of Finance. Enterprise debt over GDP • Gradually remove implicit guarantees to SOEs and other public entities.
- 15. 15 1.13. SOE leverageis high 50 55 60 65 70 75 80 2006 2008 2010 2012 2014 2016 (June) Corporate leverage is high Real Estate Metallurgical Coal Total Debt/asset, % 30 35 40 45 50 55 60 65 70 75 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 % Leverage of agency-controlled SOEs has soared Total Central Local Agency
- 16. 1.14. Key recommendationsto increase the quality and resilience of growth 16 • 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.
- 17.
- 18. 2.1. The povertyrate has declined dramatically 18 Source: National Bureau of Statistics. Rural poverty rate
- 19. 2.2. Income inequalityhas declined due to strong income growth in the middle of the distribution 19 Source: National Bureau of Statistics. Gini coefficient
- 20. 2.3. The poorestare falling further behind in rural areas 20 Source: National Bureau of Statistics. Disposable income of the top 20% over that of the bottom 20% of the income distribution
- 21. 2.4. The taxand transfer system does little for redistribution 21 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.
- 22. 2.5. Sub-national governmentshave too little own revenue 22 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.
- 23. 2.6. Student performanceis highly influenced by socioeconomic factors 23 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.
- 24. 2.7. Healthcare isless available in rural areas 24 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.
- 25. 2.8. The retirementage is low 25 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.
- 26. 2.9. Key recommendationsfor sharing the benefits of growth by providing opportunities to all 26 • 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.
- 27. More information… www.oecd.org/eco/surveys/economic-survey-china.htm OECD OECD Economics Disclaimers: Thestatistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 27 Visit the OECD Economics Department website to download this presentation: Follow us on Twitter: Check the Economic Department blog for new ideas: https://oecdecoscope.wordpress.com