Green and inclusive growth can be China's new normal

Roman Boed Flickr
Image: Roman Boed / Flickr

Structural reform can help China settle into its “new normal” of slower but more sustainable and inclusive growth


China’s idea of green economy is becoming clearer and gathering momentum, as the GEC reported earlier this month, but the OECD argues that further reform is needed to ensure that future growth is resilient, inclusive and green.

The OECD forecasts that China will see GDP growth of 7% this year and 6.9% in 2016, with this initial decline potentially signalling a “deepseated deceleration following [China’s] exceptionally long spell of very rapid growth”. This downward growth trend should not be feared, though, the OECD argues.

Despite growth rates declining, China can see broader welfare benefits by trading off ‘quantity for quality’. Economic development which is which is greener, more inclusive and based on stronger domestic consumption will put China in good stead for the future, and help shield it from risks of an abrupt stop or potential demographic problems.

The new Urbanisation Plan, released in early 2014 and focusing on human-centred and environment-friendly urbanisation, typifies this potential approach. Urbanisation can boost China’s domestic demand through consumption and investment in urban construction, public service utilities and housing for the close to 55% of China’s population living in urban areas.

“Following one of the most tremendous economic expansions in world history, China’s gradual transition towards a ‘new normal’ of slower, more sustainable growth is to be welcomed. China knows how to grow at a blistering pace. The challenge now is to ensure that future growth occurs on a more durable and inclusive footing.”

Angel Gurría, OECD Secretary-General

In the medium term, China’s transition to a knowledge based economy will require stronger equality of opportunity so as to help build the human capital needed to maintain skill levels and ensure comparative advantage in a new economic arena.

With coal continuing to dominate the energy mix, China has a fair way to go to begin reducing its absolute CO2 emissions. Yet investment in cleaner sources of energy is still rising steeply, and in 2013 China invested more in renewable energy than all European countries combined.

China has also committed to increase its non-fossil fuel share of energy to 20% by 2030, reduce CO2 emissions per unit of GDP by 40-45% (on 2005 levels) by 2020, and to aim for an absolute emissions peak by 2030.


For further details please see the OECD's China report webpage.


Image credit: "Hutong Chef, Beijing" (CC BY 2.0) by romanboed