The Organization of Economic Cooperation and Development (OECD) made a comprehensive assessment of Chinese economy for the first time in its latest report. The report says judging by China's current situation and development it is likely to outpace the US and Germany to become the largest exporter and the fourth largest economic entity in the world. By then goods and service from China would account for 10 percent of international trade volume while the current figure is 6 percent.

The OECD makes survey of the economies of its member states every 1.5 years or 2 years and submits its report. China is currently taking part in the organization as an observer.

With the help of the Chinese government the organization for the first time issues its survey report of the Chinese economy. The report says, in the last 20 years or so China's GDP grew at a speed of 9.5 percent annually and this trend is expected to continue for some time to come. Richard Herd, an expert on Chinese economy at the OECD, said the Chinese government is not afraid of reform. The policies it has enacted have had extremely great impact.

At the same time the report believes the Chinese economy still has much to improve despite the great changes taking place in the last decades. For example, the imbalance of economic development among different regions and imperfection of the judicial system etc. Although China's economic rise has helped lift the majority of Chinese out of poverty, its per capita income is still relatively low and there are signs that the wealth gap is expanding.

The report suggests that in order to eliminate regional wealth gap the government should enact policies to facilitate population flow between the rural and urban regions. However, good corresponding management is necessary in the process.

Regarding China's market reform the report says the Chinese market, though more mature after a series of reform, still has inadequacies and obstacles as far as domestic private businesses are concerned. For example, the strict limitation on access to capital market and banking financial industry, too high capital requirements on starting a business etc. To ensure continued growth raising capital distribution efficiency is the key. The company should be able to raise funds by entering the stock and securities market freely. State-owned shares in a company should be fully tradable so as to considerably improve management of listed companies.

The OECD lavishes praises when speaking of the on-going reform of banking system in China. The report says the cost of the reform, which runs as high as tens of billions of US dollars, is still within manageable range and the effect is very remarkable, since it greatly reduced the bad loan rate in state-owned bank.

When it comes to China's exchange rate reform the report says long time adoption of fixed exchange rate system would expose a country's economy to the threat of inflation. Generally speaking, adopting a floating exchange rate system will effectively help control inflation.

The report also points out that China's public finance is sound. However, the money the government spends on health care and education is still relatively low. In the next 20 years China will also face the problem of aging population, which means the government should step up effort in reforming the social security system.

By People's Daily Online