BEIJING — China’s economy is in line to overtake the United States to become the world’s largest by the end of 2016, according to a new report from the Organisation for Economic Co-operation and Development (OECD).
The Paris-based think tank on Friday released an in-depth study of China’s economic reforms, laying out a case for China to engage in a renewed push on that front. The OECD based its projections on the assumption that China’s gross domestic product will continue to grow at an average rate of about 8 percent in coming years, including 8.5 percent growth by the end of this year and 8.9 percent next year. That is appreciably faster than the Chinese government’s own predictions of 7 percent average yearly growth.
“There is significant scope of further catch-up in China,” the OECD Economic Survey of China said. “China has a strong record with respect to several of the key factors for sustainable growth and is well-positioned to emulate the record of earlier stellar Asian performers.”
The report said lagging demand for China’s exports and potential for increased inflation could present problems in achieving a high growth rate this year.
The OECD report, unveiled in Beijing, said that after withstanding a difficult global economic climate better than most other countries, China has reached a stage where critical reforms can move it beyond the financial traps that have slowed other global economic powers in growth.
“China has weathered the global economic and financial crisis of the past five years better than virtually any OECD country and than many other emerging economies,” said the OECD. “It is well placed to enjoy a fourth decade of rapid catch-up and improving living standards, notwithstanding various risks.”
Those risks include rising prices in an unsteady property market, over-lending and investment by banks to local governments, as well as income inequality and an increasingly aged population.
“However, China can avoid the ‘middle-income trap’ provided reforms are continued or stepped up,” said the report.
Earlier projections from other international groups have targeted 2020 as the year China will become the world’s largest economy by sheer volume, but the OECD moves that target forward. Still, the think tank said, China must renew its push in reforms to keep the economy powering ahead.
Among the essential reforms it listed, the OECD report suggested that China needs to move on exchange rate flexibility, reducing state ownership of companies and improve its protection of intellectual property rights. The report also targeted China’s ongoing environmental pollution problems as a weak spot, along with the two-tiered system of rights and privileges that separates people who live in cities from those born in rural farming areas. Private property rights will also be important in shoring up societal issues.