The new normal of China’s economy can be a “better normal” in achieving more balanced and stable growth, the OECD secretary-general said.
The Organisation for Economic Co-operation and Development proposes the country further strengthens market mechanism, addresses the labor market imbalance by enhancing skill provision and grants farmers greater land-use rights in its newly-released China Economic Survey.
“Seven percent is a very important and dynamic growth. The key is sustainable and we believe it can,” said Angel Gurria, secretary-general of the OECD, in an exclusive interview with chinadaily.com.cn.
The report projects China avoiding an abrupt economic slowdown as risks are manageable and urbanization and service sector development will be key drivers of growth.
New normal in economic growth
“A 10-percent growth is not sound and creates distortions and bubbles,” said Gurria, stressing that a “better normal” achieves balanced development.
A growth of 7-percent means the economy will double every 10 years, and can still generate enough spillover for the rest of the world, he said.
The Chinese government vowed to achieve the dual objectives of maintaining a medium-high growth rate and moving toward a medium-high level of development during the National People’s Congress earlier this month.
Mass entrepreneurship and innovation, together with increased public goods and services will serve as twin engines of the country’s economic development, said Vice-Premier Zhang Gaoli at the China Development Forum 2015 on March 22.
“Chinese are very entrepreneurial. They have faith in themselves and are willing to take risks to start their own companies,” said Gurria, adding that creating the right environment for entrepreneurs, such as friendly registration and legal facilities, intellectual property rights protection and angel funds for startups, is critical.
“China is a huge manufacturing center of the world and it’s very important that China continues to move up the value chain and to reinforce its technological leadership,” said Alvaro Pereira, director of country economic studies at the OECD.
Recommendations from the OECD
The OECD China Economic Survey encourages the country to further strengthen market mechanism, enhance skill provision and boost agricultural productivity.
The Chinese labor market is unbalanced to the extent that there are not enough workers at the lower-skilled end and not enough jobs at higher-educated end, said Gurria.
However, it’s inevitable that China has to follow in increasing sophistication and knowledge, he continued, suggesting that the country should map skills needed by the market while “upskilling” its labor force.
“It means communication with the market and companies to be able to identify the needs. You have to be very specific and modify the curriculum in vocational schools and training.”
China also needs to continue its land reform, encourage market consolidation and grant farmers better access to finance and skills to improve productivity, added Pereira.
“Agriculture in general is primary. The issue is real [in China too] because there are hundreds of millions of people living there. Their standard of living is very important,” said Gurria.
He affirmed the effectiveness of e-commerce in improving the agricultural industry, saying that products in rural areas today can be sold in cities because of good communication, transportation and network.
Among migrant workers, there are people who are competent and aggressive and can stay in rural regions to start businesses and do well, added Gurria. “China should be more urbanized than it is.”
According to an OECD report on economic inclusiveness, income inequality in China began to fall in recent years after rising rapidly in the period following its market drive. By last year the national Gini coefficient had fallen to slightly below 0.47, still above developed countries but similar to the levels in other emerging-market economies.