Economic Policy Reforms 2023

China

See more data for China on the related dashboard.

Product and labour markets functioning

Performance gaps

• Local protectionism - mostly manifest in the form of administrative monopolies - inhibits fair competition across sectors and across regions.

• State-owned enterprises and other public entities benefit from implicit guarantees.

Recommendations

• Strengthen the rule of law and restrict the power of administrative departments to prevent the creation of administrative monopolies and dismantle existing ones by applying the Fair Competition Review mechanism rigorously.

• Gradually phase out implicit guarantees to SOEs and other public entities by not bailing them out upon their default.

Digital transition

Performance gaps

• China has leapfrogged and became a world leader in a number of digital services such as e-commerce, online payments and digital car hailing but the digital divide between coastal and inland regions as well as in skills is large.

• The greatest skill deficit is in computer programming among major skill categories.

Recommendations

• Increase internet penetration and extend e-commerce and other services in inland and rural areas.

• Strengthen basic literacy, numeracy and computer programming skills starting from the primary level and in adult learning.

Inclusiveness, social protection, and ageing

Performance gaps

• The working age population has been falling for a decade and the overall population has peaked.

• Pension coverage is incomplete, and the share of out-of-pocket health costs is high.

Recommendations

• Provide equal opportunities by ensuring a minimum quality of public services across the country and centralising such spending to ensure provision.

• Link the retirement age to life expectancy, unify pensions, make the system more redistributive and increase the coverage of reimbursed treatments.

Climate transition

Performance gaps

• Renewables prices have successfully been reduced and subsidies are being phased out, but extreme weather adversely impacts the green transition.

• Pollution keeps taking a heavy toll on human lives.

Recommendations

• Halt the construction of new coal-fired power plants, raise environmental taxes on fossil fuels and strengthen climate mitigation action.

• Allow renewables producers to sell the electricity they produce through the grid.

Overall performance