OECD urges China to curb state industry, ease migration into cities to keep economy growing

BEIJING, China – The Organization for Economic Cooperation and Development urged China to make good on pledges to force state companies to compete in more open markets and ease movement of migrants into cities to keep its economic growth strong.

The OECD gave an upbeat assessment of the world’s second-largest economy that forecast growth at 8.5 per cent this year and said risks from inflation and government debt are low. But it said Beijing must keep productivity rising by curbing monopolies for state companies and allowing workers to move more easily into cities for higher-paid jobs.

Communist leaders who took power in November have pledged more reform. But they have yet to make clear whether they will tackle the challenge of rolling back privileges including monopolies and low-cost access to bank loans and energy for politically influential companies that are deemed “national champions.”

Chinese leaders have promised since 2005 to open industries to private competition, “and really there has been no result,” said Richard Herd, the chief author of the OECD’s report.

“What’s needed is to make these changes effective and really open up some of these sectors,” Herd said at a news conference.

Other advisers including the World Bank also have said China could face a steep decline in growth if it fails to reduce the dominance of state companies in industries including energy and finance.

The government’s effort to build national champions has prompted complaints by foreign companies that it is violating its market-opening pledges and by Chinese reform advocates that it is wasting money.

The OECD, headquartered Paris, groups together 34 of the richest economies including the United States, Japan and European countries. China is not a member but the group has a partnership with it and other major developing countries including India and Indonesia.