This Survey was prepared by Margit Molnar under the supervision of Patrick Lenain. The Survey benefitted from contributions by Ting Yan, Yusha Li, Yiying Shi, Assaf Geva, Zhihao Chen and Ran Xu. Hyunjeong Hwang provided the statistical assistance and Stephanie Henry provided editorial support. The Survey was discussed at a meeting of the Economic and Development Review Committee on 14 January 2019, with participation of representatives of the Chinese government led by the State Information Centre. The cut-off date for data and information used in the Survey is 15 March 2019. The previous Survey of China was issued in March 2017.The Survey is published on the responsibility of the Secretary General of the OECD. Information on other Surveys and how they are prepared is available at www.oecd.org/surveys

Catching up with OECD economies continues despite slowdown. Even though it is slowing down driven by structural factors such as shrinking of the working-age population, economic growth remains robust by international standards. China contributes about a quarter of global growth. The economy continues rebalancing on the back of steady consumption growth. Difficult challenges remain, however, especially the high level of total debt, which exceeds that of many OECD countries.

China’s “New Era” started with strong growth and per capita GDP will likely double by 2020 relative to 2010 (Figure 1), thus making a large contribution to the expansion of the world economy. According to long-term growth scenarios, until around 2030, China would contribute more to world growth than OECD countries (Guillemette and Turner, 2018). In that year, China’s share of world output would peak at 27%. In the recent couple of years, a greater focus has been put on the quality of growth rather than its pace, with early signs of success. Efforts have been made to stimulate domestic consumption and to avoid the worsening of macroeconomic imbalances. In the recent period, downward pressure on the economy has increased, partly as a result of escalating trade tensions, prompting the government to swiftly introduce stimulus measures to support growth.

China’s regions have been experiencing impressive growth over the past decades, but their potentials could be better exploited by creating a single product and labour market. Local protectionism increases transaction costs and hinders competition, thereby taking a toll on productivity. Administrative monopolies have long thrived and are hard to dismantle. Restrictions on the hukou and the fragmented pension system limit labour mobility. Local regulations aim at, among other things, securing the collection of local taxes, without which cities could not afford to offer the same public services to migrants as to urbanites. Hence, dismantling local regulations and creating a single product and labour market needs to go hand-in-hand with the reform of inter-governmental finances.