OECD Economic Surveys: China 2010
This Survey was prepared in the Economics Department, with Richard Herd as the main author under the supervision of Vincent Koen. The other contributors were
Paul Conway, Sam Hill, Yu-Wei Hu, Charles Pigott and Anders Reutersward. Consultancy support was provided by Yufei Pu. Analysis of Chinese microeconomic
data was undertaken by Ping He and Jianxun Yu of the Chinese National Bureau of Statistics. Technical assistance was provided by Thomas Chalaux, and secretarial
assistance by Nadine Dufour and Lillie Kee. The Survey was discussed at a special seminar of the Economic and Development Review Committee on 16 November 2009, with participation of representatives of the Chinese government. The Survey is published on the responsibility of the Secretary-General of the OECD.
Table of contents
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Assessment and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Chapter 1. Achievements, prospects and further challenges. . . . . . . . . . . . . . . . . . . . . . . 19
Keeping up robust growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Weathering the global crisis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
The social policy challenge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Chapter 2. Further monetary policy framework reform . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Monetary policy has come a long way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
The modus operandi of the PBoC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
The influence of the PBoC on the interbank market . . . . . . . . . . . . . . . . . . . . . . . . . . 50
How responsive is bank lending to money-market conditions?. . . . . . . . . . . . . . . . . 53
The way forward for interest rate reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
How sensitive is the real economy to interest rate changes? . . . . . . . . . . . . . . . . . . . 56
Do changes in aggregate demand influence inflation in China? . . . . . . . . . . . . . . . . 59
China’s exchange rate regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
The benefits of moving towards a flexible inflation target . . . . . . . . . . . . . . . . . . . . . 65
Chapter 3. Progress on financial reforms: an update. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Financial reforms have accelerated and broadened since 2005 . . . . . . . . . . . . . . . . . 72
Banking reforms are coming to fruition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Capital market development is accelerating on a firmer foundation . . . . . . . . . . . . 81
Greater priority is being given to improving credit access for underserved
segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
The financial system is gradually opening up internationally . . . . . . . . . . . . . . . . . . 93
Conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Chapter 4. Product market regulation and competition . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Product market regulation has been transformed but could be improved further . . 102
The OECD’s PMR indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Product market regulation is still restrictive in China . . . . . . . . . . . . . . . . . . . . . . . . . 104
But competition is increasingly robust in most markets . . . . . . . . . . . . . . . . . . . . . . . 105
SOE governance has been comprehensively reformed . . . . . . . . . . . . . . . . . . . . . . . . 109
SOE performance has improved but still lags the private sector . . . . . . . . . . . . . . . . 110
Detailed PMR indicator results and policy recommendations . . . . . . . . . . . . . . . . . . 113
Chapter 5. A pause in the growth of inequality? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Regional development policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Policies in favour of rural areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Government policies to reduce household income inequality . . . . . . . . . . . . . . . . . . 135
Measuring household inequality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Measuring spatial inequality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Chapter 6. A labour market in transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Labour market developments: job creation, migration and persistent
segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
New labour laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Chapter 7. Providing greater old-age security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
The demographic and social context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
The rural old-age support system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
The urban old-age support system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
Overall conclusion: further reform directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
Chapter 8. Improving the health care system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Health performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
The health system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Financing of health care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Government initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
Assessment and conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227


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