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China: stylized facts

China: stylized facts. PRESENTATION By Richard Herd Head Asian non-members Unit OECD Economics Department March 2006 OECD Development Centre Conference “China, India and Africa”. Growth has been very rapid. GDP growth at constant prices. Three factors have boosted growth:.

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China: stylized facts

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  1. China: stylized facts PRESENTATION By Richard Herd Head Asian non-members Unit OECD Economics Department March 2006 OECD Development Centre Conference “China, India and Africa”

  2. Growth has been very rapid GDP growth at constant prices

  3. Three factors have boosted growth: • Reform of the economic environment • Capital formation • Structural change

  4. Major reforms are very recent

  5. Prices are now market determined Share of price regulated transactions for industrial products

  6. The economy has opened to foreign trade Average of exports and imports as % of GDP

  7. Chinese imports a growing source of demand % of region’s GDP China

  8. The number of state firms has fallen rapidly Share of Industrial sector Firms

  9. The private sector output skyrockets …. Constant prices gross output

  10. …… and is more productive … Excess productivity of firm types relative to direct state ownership

  11. ….. dominating exports … Note: These industries represent 75% of export value in 2003. Source: NBS industrial microdata

  12. … and is now bigger than public sector Private sector value added as per cent of sector GDP

  13. Rapid growth of capital • Fixed capital formation has accounted for half of growth • Human capital expanding rapidly

  14. The capital stock has grown fast Annual Per cent change in estimated capital stock

  15. Financed by high private sector saving Per Cent of GDP

  16. Fiscal policy has been prudent Budget balance % of GDP Per cent of GDP

  17. With little recourse to public debt Budget balance as Per Cent of GDP

  18. Factors behind the growth in real income Share of growth attributable to each factor

  19. Educational output has surged • Primary education almost complete • Junior high very good • University intake tripled

  20. And is likely to continue growing Proportion of age group receiving given education level Source: Ministry of Education

  21. Third factor: structural change • Move from agriculture • Source of productivity growth

  22. Significant growth from sectoral change Productivity growth from structural change, five year average Per Cent per year % per year

  23. Important micro-economic structural reforms needed • Financial markets • Basic economic laws need improvement • Labour markets need to be freer

  24. Better basic laws for the private sector needed • A new company law is needed • A new bankruptcy law • A better anti-monopoly law also required • Laws to implement Constitutional Amendments

  25. Enforcement of commercial laws needs improving • Difficult to obtain and enforce IPR judgements • Evidence of local prejudice in judgements • Creates barriers to innovation and expansion • Move to more central funding of judiciary • Separate courts for commercial law

  26. Reducing regional inequalities • Urbanisation is a positive factor for development • Migration has been restricted • Boosts spatial income inequality • Complex group of policies needs changing

  27. Contact details • richard.herd@oecd.org • http://puck.sourceoecd.org • www.oecd.org

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