Active With The People's Republic of China

China
ACTIVE WITH the Peoples Republic of
China and the OECD A mutually benecial partnership

Chinas economy has continued to grow strongly in recent years despite a dicult international environment. Keeping up this performance in the future, and ensuring that the benets are enjoyed by all the population, will require a new round of reforms in critical areas such as nancial and labour markets, land use, and the tax system, among many others. The countrys new leadership has shown its determination to step up reforms and to further integrate China in the global economy. Rebalancing is ongoing, externally and internally, paving the way for a more consumptionled growth, and a new growth model based on higher value added products and innovation, as China catches up with the global technological frontier. Considerable eorts have also been made to improve energy eciency and raise environmental standards. However, challenges remain and China is now at a crossroad to advance the reforms needed to ensure broad, sustainable and equitable growth in the years to come. The OECD continues to strengthen its cooperation with China in support of the countrys reform agenda. Achieving prosperity through economic and social development has indeed been at the heart of our work since the foundation of the Organisation more than fty years ago. Together with our Member and Partner countries, we work to build a stronger, cleaner and fairer world economy. By bringing together the expertise of a wide range of countries and policy communities, our evidence-based analysis and the accumulated experience of our Members and Partners, we aim at informing and improving policy making in countries around the world, to the benet of all. The OECD has relevant expertise in many policy areas which feature as priorities for the Chinese leadership, such as structural reform, social inclusion, urbanisation, education, green growth and good governance. As a major economy and a source of innovative policy practices, China is a Key Partner to the OECD. The participation of Chinese government ocials in OECD Bodies and horizontal projects has increased over the years, enriching the policy debate with new perspectives. China itself benets from its active participation in the work of the Organisation, in areas such as taxation and scal aairs, transport, science and technology and innovation policy. The OECD takes pride in its co-operation with China. Today, with Chinas increasing importance as a dynamic engine for the world economy, this partnership is more relevant than ever. We look forward to continuing to strengthen and deepen this partnership. This brochure provides just a glimpse of the scope, depth and richness of our joint work and highlights the great potential that lies ahead for our future cooperation in order to design, promote and implement better poLIcIeS For better LIVeS. ANGeL GUrra, OECD Secretary-General
Contents
THE OECD AND CHINA 2 SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH 8 Maintaining Economic Resilience Supporting Green Growth Initiatives Promoting Regional Development and Urbanisation Increasing Agricultural Productivity and Food Security Promoting Development and Eective Cooperation Worldwide Better Data for Better Policies 13 15 INDUSTRY AND INNOVATION 38 Building a Knowledge Economy Developing First-Class Shipbuilding and Steel Capacities Enhancing Chemical Safety Boosting Tourism 39 40 41 43 45 9 10 11 12 EMPLOYMENT AND SOCIAL DEVELOPMENT 31 Seeking Best Practices of Social and Health Policies Improving the Labour Market Prospects of Youth Supporting SME Development and Strengthening Local Skills Fostering Skills through Education and Training Promoting Eective Consumer Policy 35 36 37 32 34
COntents
Meeting Transport Infrastructure Needs SMOOTH FUNCTIONING OF MARKETS 16 Enhancing Cooperation on International Investment Promoting Trade and Upgrading in Global Value Chains Regulating Export Credits Promoting Sound Competition Developing a Robust Financial System Improving Financial Education PUBLIC AND CORPORATE GOVERNANCE 23 Regulatory Reform and Administrative Simplication Budgeting and Public Expenditures Improving Tax Transparency and Compliance Fighting Transnational Corruption Enhancing Public Sector Integrity Raising the Bar on Corporate Governance 24 25 26 28 29 30 17 18 19 20 21 22
ENVIRONMENT AND ENERGY 46 Towards a Cleaner and Healthier Environment Combating Climate Change Providing Clean and Aordable Energy Developing Clean and Safe Nuclear Power ANNEXES Participation in OECD Bodies and Related Organisations Adherence to OECD Instruments Participation in OECD Asian Networks 52 52 52 47 48 50 51
Water 49
CONTENTS . 1
THE OECD AND CHINA

The OECDs Global Relations strategy seeks to make the Organisation a more eective and inclusive global policy network, in particular through the close cooperation with ve Key Partners (Brazil, China, India, Indonesia and South Africa) and other dynamic emerging economies worldwide. The OECD and China have a longstanding and mutually benecial relationship that has steadily developed since the mid-1990s.
2 . ACTIVE WITH THE PEOPLES REPUBLIC OF CHINA
THE OECD AND CHINA
China participates in the substantive work of many of the OECDs specialised Committees, where senior ocials from member and partner countries meet to advance ideas and review progress in specic policy areas, such as economics, trade, science, employment, education or nancial markets. China is Associate, i.e. participating on equal footing with OECD members, in the Project on Base Erosion and Prot Shifting (BEPS), International Transport Forum and the Global Forum on Transparency and Exchange of Information for Tax Purposes. China is also Participant in the Programme for International Student Assessment, the Committee on Fiscal Aairs and its subsidiary bodies as well as the Committee for Scientic and Technological Policy and its subsidiary bodies. Moreover, information on China is now systematically incorporated in many of the OECDs statistical databases, for instance the Outlooks and At a Glance series. Country-specic Policy Reviews of China such as the biennial Economic Surveys are regularly produced, which allows the OECD to deepen its understanding of Chinas policy environments and integrate its perspectives and innovative practices. China also enjoys the opportunity to participate in all stages of discussions of key OECD projects, especially those related to G20 mandates such as the BEPS project.
J Wang Jun, Commissioner of the Chinese State Administration of Taxation, and Angel Gurra, Secretary-General of the OECD, after Chinas signing of the Convention on Mutual Administrative Assistance in Tax Matters, August 2013, in Paris.
THE OECD AND CHINA . 3
The Ministry of Commerce (MOFCOM) is the key interlocutor coordinating the cooperation between the OECD and the Chinese Government, with teams based respectively in the Department of International Trade and Economic Aairs in Beijing, and in the Chinese Embassy in France. Over the years, it has played an important role in developing and guiding this cooperation, which involves a broad range of ministries and agencies. On the OECD side, the Global Relations Secretariat coordinates OECDs relations with China and other non-members, as well as other international organisations. In November 2013, a joint OECD-MOFCOM Seminar on China-OECD Cooperation was held in Beijing. 26 ministries and agencies were represented, as well as 18 OECD countries and the EU. During the seminar, representatives of the MOFCOM, the Oce of the Central Leading Group for Financial and Economic Aairs, the Ministry of Education as well as the Development Research Centre of the State Council expressed appreciation for the fruitful cooperation with the OECD.
OECD plays an inuential role internationally in economic and social policy research. Its research results, along with experiences of its member countries, provide valuable references for China in deepening reform, further opening up and participating in global economic governance. In recent years, OECD has worked together with more partners and in more elds. It has not only extended its bilateral communication and cooperation with non-members, but also actively engaged in global affairs. I believe China and OECD hold great potentials in dialogues and cooperation. We can further win-win cooperation on such issues as trade, investment, global value chain and green growth.
WANG SHoUweN, ASSISTaNT MINISTER OF COmmERcE Keynote speech at the Seminar on China-OECD cooperation, 7 November 2013, in Beijing.
THE OECD AND CHINA
In order to keep playing a key role in global governance, the OECD must adapt to globalisation. In a time when emerging countries including China in particular are playing an increasing role on the international scene, we should nd ways to work with these new partners. Our cooperation with China thus constitutes a priority in the relations between the Organisation and the rest of the world. PAscALe ANdReANi Ambassador of France to the OECD Chair of the External Relations Committee (which oversees the Organisations overall global relations)
Chinas partnership with the OECD has been long and fruitful. As China enters an exciting new phase of market reforms, and all of our countries seek more balanced, inclusive and sustainable economic approaches, there is scope for a deepening of the relationship. The OECDs strengths in domestic structural reform and standard-setting can lead to enhanced and mutually benecial cooperation in areas such as urbanisation, healthcare, corporate governance, tax and green growth. I look forward to the China Informal Reection Group contributing to this effort in 2014 and beyond. NicK BRidGe Ambassador of the United Kingdom to the OECD Chair of the China Informal Reection Group
Instruments: Facilitating international coordination and diusion of best practices

The OECD has created several legal instruments, which derive from the substantive work carried out in the Organisations Committees. They are based on in-depth analysis and reporting undertaken within the Secretariat and cover a wide range of topics from anti-corruption to environment. These instruments are of different types. They can be formal agreements ratied by countries, such as the OECD Convention on Combating Bribery of Foreign Public Ofcials in International Business Transactions, and the Codes of Liberalisation of Capital Movements and of Current Invisible Operations. They can be standards and models, for example the Standards of Transparency and Exchange of Information for Tax Purposes, or Recommendations, for example the Recommendation on Fighting Bid Rigging in Public Procurement. They may also take the form of Guidelines, for example the Guidelines for Multinational Enterprises. In many cases, norms developed within the OECD have become standards applicable worldwide. China currently adheres to ve OECD instruments: Multilateral Convention on Mutual Administrative Assistance in Tax Matters, Paris Declaration on Aid Effectiveness, Declaration on Access to Research Data from Public Funding, Declaration on International Science and Technology Cooperation for Sustainable Development and Agricultural Schemes and Codes: Ofcial Testing of Agriculture and Forestry Tractors. Bringing China and other partner countries closer to OECD instruments is an important priority for the Organisation. Currently, a concerted effort is being made to further integrate the perspectives of China and other partner countries in the OECDs standardsetting activities. In particular, the participation of China and other Key Partner countries in the development of new instruments and the revision of existing ones is crucial to ensure their global relevance. For China, a special programme has been set up, supported and coordinated by MOFCOM, to facilitate the participation of Chinese ofcials in the discussion concerning the revision and development of OECD instruments.
THE OECD AND CHINA
Secondees: oecd-china alumni

To cultivate like-mindedness and reinforce ties between the Chinese administration and the OECD, a Programme of Temporary Assignments for Chinese Government Ofcials to the OECD was set up in 2012, co-nanced by the Gesellschaft fr Internationale Zusammenarbeit (GIZ). The Programme gives Chinese mid-level ofcials the opportunity to take part in the activities of the OECD in Paris for several months, on a specic assignment in relation to their area of work. Through these stay, the Chinese ofcials help their Ministry of origin gain a better understanding of the OECD and its work, and in return help the OECD better integrate Chinas perspectives in its analyses. In 2012-13, the Programme welcomed 11 Chinese ofcials to work on policy issues identied as priority of the governments 12th Five-Year Plan for National Economic and Social Development. The assignments have covered a wide range of policy areas, from urbanisation, innovation, green growth and environment, to measuring well-being, governments revenue management, aid effectiveness, services trade restrictiveness index, and the latest project on PISA for development. These ofcials have been sent from the National Development and Reform Commission, the Development Research Centre of the State Council, Ministries of Finance, Commerce, Science and Technology, Environmental Protection and Transport. They also form the basis of the OECD-China alumni network. Working in the OECD through temporary assignment helps benet the secondee with regard to gaining knowledge, building network with experts inside and outside the OECD, and improving professional capacity. Moreover, it will contribute to the cooperation between the OECD and the sending organisation when the secondee can play a catalytic role in coordination between both sides. SHi XiAoYoNG, Ministry of Science and Technology Seconded to the OECD Directorate for Science, Technology and Industry. Between March 2013 and February 2014
SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH

Like many countries in the world, China is confronted with the challenges of transforming economic growth into sustainable development that benets all citizens. Creating resilient economic structures that can withstand external shocks, building liveable cities and lowering urban-rural divides, improving agricultural eciency, and promoting global stability and prosperity through eective development cooperation are all important issues for China in moving towards a more balanced and inclusive growth.
Sustainable groWth
Maintaining economic resilience

How can economies increase resilience to resist to economic shocks or recover quickly from them? Does structural reform positively impact a countrys economic resilience?
Through three series of publications, the OECD examines macroeco nomic and structural policies and developments, as well as their interaction. The Economic Outlook, released twice a year, analyses recent developments in the global economy and provides economic projections for 41 economies, including China. Going for Growth provides a comparative overview of structural policy developments and reform priorities for maintaining strong and stable growth across economies. The 2013 edition highlighted the gains China could reap from further education reform, stronger social protection of migrants, and easier private sector entry in sectors dominated by state-owned enterprises. The Economic Surveys, published biennially for each OECD member and Key Partner country, analyse major economic challenges in those countries and propose reform options drawing on international best practices. The Third Economic Survey of China, prepared in cooperation with Chinas State Information Centre, was released in Beijing in March 2013. It focused on how to keep growth strong and environmentally sustainable, with an in-depth analysis of Chinas urbanisation process. It also examined the need to reform the scal policy framework in order to promote smooth growth while ensuring governments at all levels can fund essential public goods. The Survey was well received by the Chinese authorities and public, with appreciation expressed publicly by core State entities such as the Ofce of the Central Leading Group for Financial and Economic Affairs, the Research Ofce of the State Council and the Central Party School of China. Moreover, the reforms discussed in this Survey are needed for China to become a high income country by the end of the current decade. These include implementing further nancial sector reforms, strengthening innovation and competition, fostering inclusive urbanisation, reforming sub-national nance to promote geographical equity and facilitate urbanisation, and greening the economy through concerted efforts. The next Survey, scheduled to be released in 2015, will focus on human capital and innovation, as well as on agriculture and rural development. www.oecd.org/eco
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Sustainable, balanced and inclusive growth . 9
Supporting green growth initiatives

The world faces two major challenges: making lives better for a global population set to rise to around 9 billion by 2050, and addressing environmental pressures that, if left unchecked, could undermine growth and development. Implementing green growth policies can thus respond to these two challenges.
The OECDs Green Growth Strategy is built upon three reports Towards Green Growth, Towards Green Growth: Monitoring Progress OECD Indicators and Tools for Delivering on Green Growth through which the OECD provides concrete and targeted advice to member and partner countries as they design and implement economic, environmental, investment and innovation policies. When tailoring green growth strategies to developing countries, the OECD assesses the links between green growth and poverty reduction, and identies the changes needed in sectors such as agriculture and infrastructure to make these more supportive of sustainable development. The OECD participates in the Task Force on Evaluation and Prospects for a Green Transition Process in China under the China Council for International Cooperation on Environment and Development (CCICED). The CCICED, a high-level advisory body composed of leading experts in the eld of environment and development, has been providing extensive support for China since 1992 in building a resource-saving and environmentally friendly society. So far, The OECD has hosted several expert seminars with the Task Force members on issues related to green growth.
China is also included in the research project Towards Green Growth in Emerging and Developing Asia, which seeks to promote green growth in countries of the Association of Southeast Asian Nations (ASEAN) in line with the regions development objectives. The nal report, together with a database of green-growth indicators for Asian countries, will be released in 2014. Beyond that, the OECD has also been assessing policies for green growth in Asias fast-growing cities in the project Urban Green Growth in Dynamic Asia. www.oecd.org/greengrowth www.oecd.org/greengrowth/asia.htm
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Sustainable groWth
Promoting regional development and urbanisation

The OECD examines how territorial development policies can best promote regional competitiveness and eective and innovative territorial governance. The OECD also sets standards to promote good practices in regional policy.
Urban development is a key policy concern in China, with the environmental and social sustainability of cities increasingly prominent on the policy agenda. In partnership with the China Development Research Foundation, the OECD produced in 2013 a joint report on Urbanisation and Green Growth in China, which focused on how the central government could facilitate the implementation of urban green growth policies to meet the objectives highlighted in both the green development and urbanisation pillars of Chinas 12th Five Year Plan. The 2013 report on The Competitiveness of Global Port-Cities included two case studies on how to improve the port performance and governance of Shanghai and Hong Kong, China. In cooperation with the National Development and Reform Commission (NDRC), the OECD is actively conducting a National Urban Policy Review of China, which is expected to be completed by end-2014. The Review will consider a wide range of national policies affecting Chinas urban development. The OECDs rst territorial review of a Chinese region was devoted to Guangdong Province, in 2010. The review discussed how some OECD principles and best practices on regional development could help address the economic and environmental challenges the province faced. In addition, several Chinese cities such as Dalian, Tianjin, Qingdao and Yantai had also been included in the study Trans-border Urban Cooperation in the Pan Yellow Sea Region (2009). To facilitate comparative analysis at a sub-national level, the OECD has established comprehensive regional and metropolitan databases on demographic, economic, labour market and innovation. The OECD is working actively with Chinas National Bureau of Statistics (NBS) to incorporate Chinese data into these databases. www.oecd.org/gov/ruraldevelopment www.oecd.org/gov/cities
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Increasing agricultural productivity and food security

China has made major progress on food security: the number of undernourished fell from 254 million in 1990-92 to 158 million in 2010, representing 73% of the worldwide drop. Access to sucient food remains still a struggle for many households, especially among the poorest in rural areas.
OECDs collaboration with China on agriculture-related issues has intensied in the past year. In October 2013, the OECD and the Agricultural Trade Promotion Centre of the Ministry of Agriculture organised in Beijing the workshop on Policies to Enhance Agricultural Innovation and Productivity: Focus on China. Participants discussed ways to ensure that global agricultural productivity growth, particularly in China, is sufcient to meet growing demand in a sustainable manner. This effort falls within the context of Chinas key agricultural directive (Document No.1) issued in 2012, which focused on investment in agricultural science and technology to help boost agricultural production and farmers incomes. Policymakers and other stakeholders are interested in knowing how much support governments provide to agriculture and in what form, how this support has changed over time, and how it compares between countries. The OECD publishes its annual update of trends in the Producer Support Estimates indicator to monitor and evaluate the level and composition of support provided to agriculture, for member countries and a growing number of emerging economies, including China. The results are published in the report Agricultural Policy Monitoring and Evaluation. The 2013 edition examined Chinas government interventions in agricultural commodity markets in 2011-12, and the corresponding impacts on trade and domestic economy.
The OECD and the UN Food and Agriculture Organisation (FAO) publish jointly an annual Agricultural Outlook, which includes detailed projections of the medium-term outlook for commodities for major economies. The 2013 edition, released in Beijing at the World Agricultural Outlook Conference in June, featured a chapter on the prospects and challenges in Chinas agro-food sector in the next decade, which was prepared with the Chinese Academy of Agricultural Sciences (CAAS). Collaboration with the CAAS has further expanded in 2014: CAAS placed an analyst with the OECD to work on the Outlook this year. The OECD is also a key reference for the certication and standardisation of certain agricultural and forestry inputs and commodities, which aim to facilitate international trade. China has been an active member of the OECD Tractor Codes since 1988, and is currently nearing completion of its formal application to join the OECD Seed Schemes in 2014. www.oecd.org/agriculture www.oecd.org/agriculture/code
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Sustainable groWth
Promoting development and eective cooperation worldwide

The OECD Strategy on Development, adopted in the 2012 Ministerial Council Meeting, gives fresh impetus to OECDs founding mission of contributing to the development of all countries by sharing knowledge and policy experiences. As Chinas international assistance continues to expand, the OECD stands ready to support China to improve its management of the South-South Cooperation and the eectiveness of its foreign aid.
The OECDs Development Assistance Committee (DAC) is a unique international forum where bilateral providers of development cooperation and multilateral agencies work together to improve the quantity and quality of their development cooperation. It is actively engaging with China, in particular through the China-DAC Study Group which was formed in 2009 to share knowledge and exchange experiences on promoting growth and reducing poverty in developing countries. The current focus of the Study Group is on the evaluation of the effectiveness of development cooperation. China participates in DAC High and Senior-Level Meetings, as well as in the OECD Global Forum on Development and in the OECD-WTOs work on tracking of aid for trade. Building on the ndings from two joint study visits to Tanzania and Zimbabwe, the China-DAC Study Group organised in Beijing in 2013 the Roundtable on Effective Development Cooperation: Drawing Lessons from Agricultural Development in Africa. The OECD also organised in September 2013 with the PRC Embassy in France a seminar to share views on promoting development. www.oecd.org/dac www.oecd.org/dac/cdsg
Knowledge sharing through the Development Centre

As an independent platform for knowledge-sharing between the OECD and non-member countries, the OECD Development Centre works closely with developing economies worldwide, through policy dialogues in areas such as growth, poverty alleviation and the reduction of inequality. Current members of the Centre include non OECD countries such as Brazil, India, Indonesia, South Africa, Thailand and Viet Nam. The Centre has been collaborating with China since the early 1980s. In recent years, cooperation has been strengthened with the Development Research Centre (DRC) of the State Council in the area of competitiveness in the services industries, with focus on how productivity and efciency in services industries can be boosted to become a more prominent driver of economic growth, employment creation and more equitable income distribution. This work will feed into the publication Perspectives on Global Development 2014, which will also include an analysis on the different development paths of Brazil, Russia, India,
Indonesia, South Africa and China. The publication is regularly presented at DRC, the Chinese Academy of Social Sciences (CASS) and more recently Renmin University. The Perspectives on Global Development Industrial Policies in a Changing World offers a solid basis for well-informed social and economic policies that could facilitate Chinas transmission to a high income country. GAO SHi-Ji: Director General, Institute for Resources and Environmental Policy Studies, Development Research Centre of the State Council, at the seminar on the Perspectives on Global Development 2013 organised with the DRC, 18 November 2013, in Beijing. In addition, there have been continuous interactions between China and the Centre regarding the latters regional work in Emerging Asia, Africa and Latin America. An Economic Outlook is published annually for each region. The 2014 edition of the Economic Outlook for Southeast Asia, China and India was dedicated to policy priorities for growing beyond middle-income trap in Emerging Asia, with a country note on China addressing in particular the role of local governments in scal reforms. Beyond the Outlook, China also plays an active role in the Regional Roundtable on Macroeconomic Policies, Economic and Development Planning, which is a platform for open dialogue among Asian countries on nearterm macroeconomic and structural policies, jointly organised by the OECD, the ASEAN+3 Macroeconomic Research Ofce (AMRO) and the Asian Development Bank (ADB). In Africa, Chinas growing impact has been at the core of the analysis on the African Economic Outlook: the 2013 edition discussed the potential of Chinese foreign investments and trade in the natural
resources sector for Africas structural transformation. Finally, cooperation with China on the Latin American Outlook has benetted from frequent collaboration with CASS in recent years. The Centre launched in 2007 its Emerging Markets Network (EmNet) initiative, which serves as a platform for experience-sharing among OECD-based multinational corporations and their counterparts in emerging countries. China is active in EmNet through the China International Council for the Promotion of Multinational Corporations (CICPMC), an association for business promotion linked to the Ministry of Commerce. CICPMC-EmNet joint sessions have been organised since 2010 in Beijing.
From left to right: Zhang Shaogang, Director General, MOFCOMs Department of International Trade and Economic Aairs; Rintaro Tamaki, Deputy Secretary General of the OECD; Carl Dahlman, Head of Global Research of the OECD Development Centre, during an EmNet meeting in Beijing, November 2013.
Sustainable groWth
Better data for better policies

The OECD maintains comprehensive databases of comparable statistics to support its analytical and policy work. The Organisation also develops and promotes international statistical standards and coordinates statistical activities with other international organisations.
China has been included, for a number of years now, in some of the most high prole and important OECD databases. These include a range of shortterm economic statistics, for example, international trade, monthly nancial statistics such as monetary aggregates and interest rates, balance of payments, production indices, and prices. These frequentlyconsulted statistics provide an overview and comparison of recent international economic developments and are used in the modelling of the business cycle. Additionally, China has been included in the National Accounts databases and in 2012 its quarterly GDP in volume terms were published for the rst time. The OECD Factbook, an extensive, annual compilation of economic, environmental and social statistics, features a growing range of Chinese statistics covering a widening selection of statistical topics. A crucial element of the deeper engagement between the OECD and China is the development of the full range of standardised, comprehensive statistical indicators as the basis for making meaningful comparisons between China and OECD partner countries. To this end, a technical dialogue with Chinas NBS has been ongoing since 1996, in particular in the area of National Accounts. Furthermore, the OECD is leading work in areas such as international trade in value added (TiVA), green growth and gender indicators that will help to ensure international statistics to remain relevant and meaningful. In 2013, China was included in the OECD publication Hows Life? Measuring Well-being. Representatives of the Development Research Centre of the State Council participated through secondment to work closely with the Organisation for the OECD Better Life Initiative. www.oecd.org/std www.oecd.org/statistics/howslife.htm
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SMOOTH FUNCTIONING OF MARKETS

Well-functioning markets are essential to growth and development. In China, reform and openingup has been the key to its economic success over the past three decades. While the public sector remains a pillar of the Chinese economy, the market is expected to play a decisive role in allocating resources. Making rules more open, fair, transparent and predictable for trade, investment, competition and nancial sector is key to the success of reform in China.
16 . Smooth Functioning of marKets
Functioning Markets
Enhancing cooperation on international investment

International investment has played a central role in Chinas successful integration in the global economy. China is now a major investor abroad, especially in developing regions. As such, China has a strong interest in an open, fair and rules-based international investment regime.
The OECD promotes investment policy reform and international investment cooperation, with a view to enhancing the contribution of international investment to growth and sustainable development. In particular, the OECD monitors investment protectionism in the context of the G20, produces statistics on foreign direct investments, and develops international instruments and tools which are used worldwide, such as the Declaration on International Investment and Multinational Enterprises, the Codes of Liberalisation of Capital Movements, the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conict-Affected and High-Risk Areas, and the Policy Framework for Investment. The OECD also hosts the inter-governmental Freedom of Investment (FOI) Roundtable, through which governments exchange information and experiences on investment policies and emerging issues for instance, recipient countries policies towards sovereign wealth funds, international investment law and the investor-state dispute settlement system. China, as a major capital-importing and exporting country, has made important contributions to enriching the discussions in investment-related areas in the OECD. China has contributed throughout the years to a wide range of OECD activities, including the FOI Roundtable and the Global Forum on International Investment, and is expected to be involved in the update of the Policy Framework for Investment. At the invitation of the Chinese government, the OECD is also a permanent cosponsor of two major annual investment events in China, the China International Fair for Investment and Trade and the China Overseas Investment Fair. www.oecd.org/daf/investment
Smooth functioning of marKets . 17
Promoting trade and upgrading in global value chains

Trade liberalisation has played a key role in Chinas economic transformation. Developing the multilateral trading system and keeping markets open is of mutual interest for the OECD and China, as both share a strong interest in promoting a better understanding of global value chains (GVCs) and their trade policy implications.
The OECD has a long history of studying value chain dynamics. Most recently, the OECD-WTO Trade in Value Added (TiVA) database was developed to measure trade in value added terms and to generate new insights about the commercial relations among economies and the process of value creation. The second release of the database in May 2013 provided metrics that more precisely measure the value of goods and services traded in 57 economies, including China, covering the years 1995, 2000, 2005, 2008 and 2009 and broken down by 18 industries. Further work on the mapping of GVCs will provide additional evidence on the position and role of China in GVCs. In addition, the policy implications of GVCs across different domains trade, investment, upgrading and competiveness are also under examination. At the invitation of the Chinese government, the OECD is a co-sponsor of the China Beijing International Fair for Trade in Services and is invited to co-organise a Global Forum on Services in GVCs with MOFCOM at the event this year. Additionally, the OECD is compiling a regulatory database of services regulations, encompassing 17 services sectors and sub-sectors in 40 countries, including China. This qualitative database is being complemented by quantied indices of services trade restrictiveness
(the Services Trade Restrictiveness Index STRI) which provide the information needed to assess the impact of planned domestic reforms, and to guide their sequencing and successful implementation. The indices will be indispensable for trade negotiators as they consider different options and approaches to liberalisation. An ofcial from MOFCOM worked on the STRI project at the OECD in 2013. The OECD Trade Facilitation Indicators identify priority areas for reform in order to improve border procedures and reduce trade costs for countries at various stages of development. The OECD-MOFCOM conference on trade facilitation, which took place in Beijing in July 2013, allowed the exchange of information on related OECD work and Chinas endeavours to modernise the customs and border process and promote trade facilitation. www.oecd.org/trade http://oe.cd/gvc http://oe.cd/tiva
Functioning Markets
The discussion on global value chains (GVCs) has made signicant progress. It has established the positive correlation between trade and peoples welfare, growth and employment. It has also highlighted the many areas that need to be improved in trade statistics and policies. These ndings will help foster an international trade environment of greater freedom, equality and inclusiveness ()
China has taken an active part in the study on GVCs. We will work closely with the WTO and the OECD and further participate in the discussion on the impact of GVCs on trade policies. H.E. AmbAssAdoR YU JiANHUA, Deputy International Trade Representative of China and Former Assistant Minister of Commerce Intervention during the Trade Session at the Ministerial Council Meeting, 30 May 2013, Paris
Regulating export credits

Eliminating subsidies and unfair practices in economic competition helps form the foundation of a healthy and dynamic global economy. OECD export credits work is precisely one of the basic building blocks of the ever growing structure of global trade agreements that aim to maintain open and ecient markets.
The OECD provides a forum for discussion and coordination of national export credit policies relating to good governance issues, such as anti-bribery measures, environmental and social due diligence, and sustainable lending. OECD-housed rules ensure that export credit programmes conform to anti-subsidy obligations made under the auspices of the WTO and contribute to open markets and fair trade. The Arrangement on Ofcially Supported Export Credits stipulates the most generous nancial terms and conditions for ofcially supported export credits. The resulting export credits disciplines apply rst and foremost to OECD members. However, many nonmembers, including Brazil, China, India and South Africa, are invited to participate and/or observe meetings of the Working Party on Export Credits and Credit Guarantees and of the Participants of the Arrangement. www.oecd.org/trade/xcred
Smooth functioning of marKets . 19
Promoting sound competition

Regulatory barriers to competition can potentially hamper development and prevent consumers from beneting from economic growth.
In order to promote sound competition principles and build mutual understanding and cross-border convergence, the OECD has developed international best practices on cooperation between competition enforcers, on hard core cartels and on assessment of government policies for anti-competitive effects. A Competition Assessment Toolkit provides a checklist methodology to review laws and regulations that could restrain competition. The OECD has also developed Guidelines for Fighting Bid Rigging in Public Procurement to assist governments in raising awareness of the risks and costs of collusion in public procurement. During the early stages of implementation of Chinas Anti-Monopoly Law, the OECD held a series of capacity building events with judges from Chinas Supreme Peoples Court and ofcials from MOFCOM, NDRC and the State Administration for Industry and Commerce. In 2010 and 2011, OECD, ADB and MOFCOM jointly hosted the rst meetings on competition policy of the State Councils Anti-Monopoly Commission, bringing together senior ofcials from a wide range of State entities. Since then, cooperation with China has expanded as Chinas competition authorities increase their enforcement capabilities. Ofcials from China frequently attend meetings of the Competition Committee and participate in the Competition Programme of the OECD/ Korea Policy Centre. Following a training session in competition law provided by the Korea Centre in 2012 in Beijing, another workshop is now being planned in 2014 specically for the Chinese authorities. In 2013, the OECDs Competition Committee embarked on an ambitious programme to promote and improve cross-border cooperation in enforcing competition law. As business becomes more globalised, competition authorities increasingly face the need to work together. Further simplifying and improving cooperation will remain a focus of the OECDs work in competition through, and most likely beyond, 2014. www.oecd.org/competition
Functioning Markets
Developing a robust nancial system

The OECD promotes ecient, open, stable and sound market-oriented nancial systems, based on high levels of transparency, condence and integrity. It monitors and surveys current market developments and structural changes, publishing its key ndings in the biannual publication Financial Market Trends.
The OECD also assesses and develops reform measures related to banking, securities and institutional investors (in particular, insurance companies and private pension schemes). In addition, it facilitates policy dialogue and exchange of experiences, for instance, on capital market reform, nancial education and nancial consumer protection. In China, good macroeconomic fundamentals, sound regulations and a limited exposure to international markets have helped to promote the smooth functioning of the nancial system and to shield it from major repercussions of the global economic and nancial crisis. However, strong credit growth risks have been accumulating, especially in the shadow banking sector, which will bear watching and may require further policy action. Moving forward, China will continue to integrate and gain importance in world nancial markets as a result of its economic growth and rising shares in world trade and investment. China participates in the OECD/ADB Institute Roundtable on Capital Market Reform in Asia, the OECD Global Forum on Public Debt Management as well as the OECD/World Bank/IMF Global Bond Market Forum. China attended the rst Asian Roundtable on Financial Consumer Protection and has contributed to and supported the work of the G20/OECD Task Force on Financial Consumer Protection. www.oecd.org/daf/n
URL for this page www.oecd.org/daf/fmt Smooth functioning of marKets . 21
Improving nancial education

The global nancial crisis brought to the forefront the need for comprehensive nancial education programmes in economies at dierent stages of development. Financial education is necessary to develop awareness and skills among both consumers and investors.
China in particular needs to enhance access to and use of nancial services for its citizens, particularly in remote and underserved areas of the country. It should also support investor education in order to promote better investment habits by its middle class and the wealthier members of society. China is currently developing its National Strategy for Financial Education, which follows the recommendations of the OECD in this respect and is based on the cooperation between public authorities with an interest and mandate in nancial consumer empowerment, as detailed in Chinas contribution to the G20-OECD Publication Advancing National Strategies for Financial Education under the Russian Presidency in 2013. Shanghai-China also participated in 2012 in the rst ever Financial Literacy Assessment in the OECD Programme for International Student Assessment (PISA). The OECD formulates recommendations through the International Network on Financial Education (INFE) and through its participation in the work of the G20. Established in 2008, the OECD/INFE brings together public experts from more than 270 public institutions and 107 economies in order to undertake analytical work and develop good practices. China has a strong presence in this network. Ofcial members include the Peoples Bank of China, the China Banking Regulatory Commission and the China Institute for Educational Finance Research. www.oecd.org/nance/nancial-education
PUBLIC AND CORPORATE GOVERNANCE

China is committed to develop a modern legal, institutional and regulatory framework for a market economy. Good governance of the public and private sectors requires streamlining the administration, reforming tax and scal relations across levels of government, combating corruption in business and public sectors, and strengthening the eciency and transparency of corporate practices for both private and state-owned enterprises.
Public and Corporate Governance . 23
Regulatory reform and administrative simplication

Regulatory policy touches many aspects in every sector of the economy and aects the everyday life of businesses and citizens.
Through the Guiding Principles for Regulatory Quality and Performance and the APEC-OECD Integrated Checklist on Regulatory Reform, the OECD helps countries to design and implement regulations to enhance the functioning of markets, protect health, safety and environment, deregulate when appropriate and encourage more open competition. The OECD also works on administrative simplication, regulatory compliance and enforcement, regulatory impact assessment, transparency and communication, and alternatives to regulation. While China has made enormous progress in developing a modern legal and regulatory foundation for a market economy, important challenges remain. These include further clarication of the scope of state ownership, reform of relations among central and local governments to ensure greater policy coherence, rmer establishment of the rule of law, and the strengthening of regulatory institutions and processes. The Regulatory Reform Review of China, conducted in cooperation with the NDRC in 2009, advised the government to improve its regulatory capabilities, ensure transparency of regulation and simplify, revise or eliminate regulation when necessary. In March 2013, the Plan on Structural Reforms and Functional Transformation of the State Council set out a new institutional framework for regulating various sectors and announced important administrative and regulatory reforms in terms of reducing the States intervention in economic activities. The OECD is currently developing a set of Best Practice Principles for the Governance of Regulators, which can provide a useful reference for China as to the level of independence, funding, management and organisation of regulators. www.oecd.org/gov/regref
24 . Public and Corporate Governance
Governance
Budgeting and public expenditures

Maintaining scal discipline, allocating resources to where they are most valued, and achieving greater eciency in government operations have a crucial impact on overall national economic performance.
The OECD carries out research across the full range of budgeting issues through reviews of country budgeting systems and comparative analysis of specic aspects of the budgeting, and maintains a comprehensive Database on International Budget Practices and Procedures. The results of this work are published in the OECD Journal on Budgeting. The OECD has collaborated with the Chinese Ministry of Finance on the design of reforms for the budget formulation and implementation process since the 1990s. In addition, the OECD has worked with the National Peoples Congress in reforming the budget approval process. Currently, cooperation with China focuses on the issue of the public governance of publicprivate partnership (PPPs) arrangements. China is also an active participant in the OECDs Senior Budget Ofcials Regional Network for Asia, which brings together budget directors and senior ofcials from Asian and OECD countries in order to share policy experiences and discuss common budgetary issues. The work of this Network is based on three pillars: cross-country analytical studies in order to identify best practices; peer reviews or proles of the budgeting systems of countries in the region; and a database of budget institutions and practices in the Asian region. www.oecd.org/gov/budgeting
Improving tax transparency and compliance

Since the mid-1990s, the OECD is committed to interaction with China on domestic tax reform and on enhancing international tax cooperation in a partnership, through which tax ocials work at the front line to exchange opinions on key policy issues and to shape together the international tax landscape.
In the past 20 years, cooperation with China has resulted in the delivery of around 120 technical training events on taxation, attended by more than 15,000 Chinese tax ofcials. The events have helped China implement taxation and administrative measures that are in line with international best practices and standards. Since 2004, China has been a regular and active Participant in the OECD Committee on Fiscal Affairs. China is also a member of the Forum on Tax Administration, which brings together the Tax Commissioners from over 40 economies to improve tax compliance, as well as an Associate in the joint OECD/ G20 project on Base Erosion and Proting Shifting, which aims to give governments the domestic and international instruments to prevent corporations from paying little or no taxes. China plays a leading role in the Global Forum on Transparency and Exchange of Information for Tax Purposes as Vice-Chair of the Steering Group. The Forum, gathering about 120 OECD and non-OECD jurisdictions, monitors the implementation of internationally-agreed standards on transparency and exchange of information for tax purposes through country peer reviews. Additionally, China is also a member of the Steering
Group of the newly launched Global Forum on Transfer Pricing as well as the Global Forum on Value Added Tax. In April 2013, the State Administration of Taxation and the OECD signed a Memorandum of Understanding which sets out a wide range of areas of cooperation on tax policies. In August 2013, China signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which is a multilateral agreement designed to facilitate international cooperation among tax authorities to improve their ability to tackle tax evasion and avoidance and ensure full implementation of their national tax laws, while respecting the fundamental rights of taxpayers. www.oecd.org/taxation www.oecd.org/tax/globalrelations
Governance
Commissioner of Chinas State Administration of Taxation WANG Jun, with the OECD Secretary-General Angel Gurra, at the signing ceremony of Chinas adherence to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, on 27 August 2013 in Paris.
Fighting transnational corruption

As China expands its global trade and investment network, Chinese companies encounter increased risk of corruption in the global marketplace.
China has participated in meetings of the WGB since 2007. In October 2010, the OECD and the Ministry of Supervision (MOS) jointly organised a technical seminar on foreign bribery and the Convention. In May 2011 Chinas foreign bribery offence came into effect. As a member of the G20 Anti-Corruption Working Group, China has joined other G20 members in formally calling for active engagement with the WGB with a view to exploring adherence to the Convention. In addition, China has been a member of the ADB/OECD Anti-Corruption Initiative for Asia and the Pacic since 2005, and has endorsed the ADB/OECD AntiCorruption Action Plan for Asia and the Pacic. In August 2014 in Harbin, the OECD will co-organise with MOS a workshop on the bribery of foreign public ofcials in the margins of the meeting of the APEC Anti-Corruption Task Force Working Group. Becoming a Party to the Anti-Bribery Convention would enable China to more effectively contribute to international standards and policy making on foreign bribery, and actively participate in monitoring implementation of these standards by its trade and investment partners and competitors. The reputation for clean and transparent conduct by Chinese enterprises in cross-border business would increase with Chinas adherence to the Convention. Meanwhile, foreign companies doing business in China would be more reluctant to engage in corrupt activities in China, thus contributing to sustainable economic growth.
Enforcement of Chinas bribery laws would also be enhanced, due to the Convention framework for providing effective legal assistance in trans-border bribery investigations and proceedings, including conscation of bribe proceeds. Moreover, accession to the Convention would provide China with an important platform for sharing its good practices, including for preventing and detecting corrupt activities by state-owned enterprises conducting business in foreign markets. www.oecd.org/daf/anti-bribery/ www.oecd.org/site/adboecdanti-corruptioninitiative/ www.oecd.org/corruption
Governance
Enhancing public sector integrity

There are growing concerns in China to ensure that the integrity of public decisions is not compromised by public ocials private interests, and that waste in the public sector is minimised.
The new leadership of the Central Commission for Discipline Inspection (CCDI) have vowed to speed up anti-corruption efforts in the public sector and proposed to improve regulations governing the conduct of public servants. The OECD stands ready to support the CCDI and the Ministry of Supervision by providing hands-on policy advice on the instruments, processes and structures to effectively map and mitigate integrity risks, implement a code of conduct, support education and manage asset disclosures in order to build a culture of integrity in the public sector. More widely, Asian countries have paid increasing attention to the need to enhance public sector integrity systems. In supporting these efforts, in July 2013 in Dili, Timor-Leste, the 12th Regional Seminar of the ADB/ OECD Anti-Corruption Initiative for Asia and the Pacic shared experiences of Asian countries in designing and implementing an effective whistle-blower protection system. The seminar also discussed ways to strengthen anti-corruption agencies in the region. www.oecd.org/gov/ethics
Raising the bar on corporate governance

The rapid growth of the Chinese economy and the expansion of Chinas equity markets have pushed corporate governance high on the national reform agenda. Healthy capital markets and ecient, transparent corporate practices are essential for growth and innovation. The degree of state ownership in both listed and unlisted companies is a source of concern to domestic and foreign competitors. As China is an important player in the world economy, eorts to reform its governance practices are of global relevance.
For over a decade, the OECD has engaged closely with China to support its reform efforts and benet from its experience. This cooperation takes place through the Corporate Governance Committee, the Working Party on State Ownership and Privatisation Practices, the Asian Roundtable on Corporate Governance and the China-OECD Policy Dialogue on Corporate Governance. Two OECD instruments, the Principles of Corporate Governance (Principles) and the OECD Guidelines on Corporate Governance of State-Owned Enterprises (Guidelines) serve as references for this work. The Principles, used across the globe as a reference point for domestic reforms, are intended to help countries evaluate and improve their legal, institutional and regulatory framework for corporate governance, and to provide guidance and suggestions for stock exchanges, investors, corporations and other parties involved in the development of good corporate governance. They are recognised by the Financial Stability Board (FSB) as one of the key standards for international nancial stability, and form the basis for the corporate governance component of the World Bank Report on the Observance of Standards and Codes.
The Guidelines, developed based on the Principles, take as a starting point that state-owned enterprises (SOEs) should be as accountable to the general public as private enterprises should be to their shareholders. They help governments organise their ownership and regulatory roles, while ensuring efcient and transparent governance of individual SOEs. Well-governed SOEs can in turn help boost national competitiveness and limit the risk of scal drainage. Furthermore, SOEs which operate with higher standards of governance are also better equipped to pursue commercial and non-commercial priorities instructed by their government owners. In 2014, the OECD is undertaking a review of the Principles and the Guidelines. China, alongside other FSB members, has been invited to participate in the review as an Associate, i.e. on an equal footing with OECD members, so as to ensure that the updated standards truly reect an international perspective. In autumn 2013, two seminars were organised in Beijing to facilitate Chinas participation in the revision of the two instruments by deepening its understanding of the review process, the relevance of the instruments and possible issues for review. Both seminars featured high-level representatives of the relevant Chinese government organs. The Chinese Securities Regulatory Commission and the State-owned Assets Supervision and Administration Commission of the State Council respectively have conrmed a willingness to take part in the revision processes of the two instruments. www.oecd.org/daf/corporateaairs
EMPLOYMENT AND SOCIAL DEVELOPMENT

China has increased its eorts to put in place an ecient and equitable welfare model, covering a greater proportion of its population. Health, pensions, education, vocational training and consumer policy are key components of the Chinese social security system. All these are essential to enhancing human capital, increasing social cohesion and achieving more inclusive economic growth.
EmploYment and Social Development . 31
Seeking best practices of social and health policies

Society OECDs work on social policy covers a wide range of issues and continuously seeks new best practices with regard to changing socio-demographic factors and labour market conditions.
In December 2011, the OECD published jointly with the OECD/Korea Policy Centre Society at a Glance Asia/Pacic, which includes a special focus on unpaid work and the ways to facilitate womens access to employment in China. A new edition is scheduled for publication in the coming summer, which will feature a special chapter on gender equality in education, employment and entrepreneurship (the three Es) in Asian countries, as well as 25 social indicators. In the context of the OECD Gender Initiative, a report on Closing the Gender Gap: Act Now was published in December 2012, together with the new OECD Gender Data portal that covers OECD members and Brazil, China, India, Indonesia, Russia and South Africa. The report examined latest trends on gender equality in the three Es and discussed ways to best close the remaining gender gaps in these areas. www.oecd.org/els/social/indicators/asia www.oecd.org/gender/equality
Pensions China is facing considerable socioeconomic and demographic shifts that call for continued pension reforms to oer greater protection to citizens while keeping costs in check.
The OECD analyses retirement income systems, providing a reference for pension comparison across the
32 . EmploYment and social Development
Social Development
OECD and the Asia-Pacic region. The OECD also works with Chinese authorities on general pension reform and risk awareness and reduction initiatives. The biennial publication Pensions at a Glance Asia/Pacic covers 11 economies within the Asian region, including China, and presents key pension indicators such as replacement rates and pension wealth. The 2013 edition provided a reference for pension comparison throughout the region www.oecd.org/els/social/pensions
economies. The report showed notably that Chinas per capita health expenditure was still lower than the regional average in 2010, although the gure had been progressing rapidly over the past 10 years. China also participates in the World Health Organisation (WHO)OECD Asia/Pacic Health Care Quality Improvement Network which helps countries strengthen information infrastructure to measure quality, and advance quality improvements programmes. Collaborative OECD and WHO work has shown that investing in preventive measures to reduce tobacco consumption, harmful use of alcohol and an unhealthy diet is a highly cost-effective strategy for China. Furthermore, OECD work shows that this strategy can substantially reduce the burden of chronic diseases at an annual cost of less than US$ 2 per capita. www.oecd.org/health www.oecdkorea.org www.oecd.org/health/chronicdiseases
Health As the global nancial and economic crisis is forcing countries to seek ways to rein in public spending, health systems need to increase their eciency and deliver value for money.
The OECD monitors health-related data such as health status, health care resources, expenditure and nancing, as well as indicators on the quality of care in OECD and Asia/Pacic economies. It advises countries on policies to prevent disease and improve health-system efciency through care coordination and the implementation of information technologies. The OECD also helps countries design pharmaceutical policies and address future health workforce and long-term care needs. The OECD is increasing its reach to China and other countries in the region. Much of this work with Chinas health authorities has been conducted through the Korea Policy Centre, which organises meetings and workshops to exchange policy experience between China and the region to promote the use of health expenditure data and foster quality improvement programmes. The 2012 edition of Health at a Glance: Asia/Pacic presented a set of key indicators on health systems for 27 Asia/Pacic
EmploYment and social Development . 33
Improving the labour market prospects of youth

The OECD monitors and compares developments in employment and labour markets across member and partner countries including China.
The annual Employment Outlook analyses labour market trends and monitors reforms in areas such as active labour market policies, employment protection and the minimum wage. The OECD also provides countryspecic analysis and policy recommendations to help governments create jobs, particularly for vulnerable groups, such as younger, older and disabled workers. In May 2013, Ministers from OECD member countries endorsed the OECD Youth Action Plan, which detailed actions that can help bring down youth unemployment from its current record-high levels, as well as structural changes to improve school-to-work transitions in the medium-long term. Different activities have been organised, ranging from short reports focusing on country-specic challenges to fully-edged reviews of youth labour market outcomes. Some of these activities have been completed or are underway, notably the reports to assist Ireland and Italy in the implementation of the Youth Guarantee schemes of the European Commission, two longer reports on youth outcomes in Brazil and Tunisia, and a workshop on apprenticeships scheduled for early April, in Paris. The OECD has also done extensive work in the context of the G20 task force on employment, covering China in a number of reports on youth labour market outcomes, active labour market policies and quality apprenticeships. www.oecd.org/els www.oecd.org/g20/topics/employment-and-social-policy
Social Development
Supporting Sme development and strengthening local skills

Addressing the nancing challenge for small and medium-sized enterprises (SMEs) is imperative to create new jobs and foster innovation.
The OECD analyses best practices in terms of design, implementation and evaluation of initiatives to promote entrepreneurship, the growth of SMEs and local economic and employment development. China has participated since 2000 in the OECD Bologna Process on SME and Entrepreneurship Policies, which brings together highlevel policymakers from OECD countries and emerging economies to debate policy successes and failures in the area of SME and entrepreneurship policy. In 2014, China will also be invited to participate in the work on the Scoreboard on Financing SMEs and Entrepreneurs. China plays an active role in the Initiative on Employment and Skills Strategies in Southeast Asia (ESSSA), conducted jointly by the OECD, the International Labour Organisation (ILO) and the ASEAN. This Initiative helps policymakers design policies, develop adequate governance mechanisms and strengthen government capacities to implement effective local employment and skills development strategies. In March 2014, the 6th ESSSA experts meeting on Building Effective Skills Strategies to Foster Convergence and Inclusive Growth was hosted in Bangkok, to discuss how to best tackle skills mismatch locally and develop skills in urban and rural areas. In the context of its G20 work in 2013, the OECD produced jointly with the World Bank and in consultation with the ILO and UNESCO a report on skills indicators for developing countries. The report
presented a conceptual framework for choosing the most appropriate indicators to guide skills development policies and benchmark country performance. www.oecd.org/cfe/leed/employmentesssa.htm www.oecd.org/g20/topics/employment-and-social-policy/ publicationsdocuments
Fostering skills through education and training

Skills have become the global currency of the 21st century. Without proper investment in skills and education, technological progress does not translate into economic growth, and countries can no longer compete in an increasingly knowledge-based global society.
The OECD helps policymakers foster human and social capital skills, and leverage education and training systems for dynamic and sustainable economies. Through comparative data and policy analysis, it strives to promote efcient and effective systems and improve learning outcomes. China aims to make senior high school education universal by 2020. It has placed an emphasis on learning quality and will participate in the 2015 Round of the Programme for International Student Assessment (PISA), which compares learning performance in the areas of reading, mathematics and science, and involves half a million 15-year olds in 65 economies. Some parts of China have already participated in previous rounds of this threeyearly exercise. The municipality of Shanghai and Hong Kong, China both performed successfully in the last PISA assessment, demonstrating the rapid progress they have made in reforming their respective education systems. China is also included in the annual Education at a Glance agship publication, which is also available in Chinese. The indicators provide deep insights into how education systems operate, how much is spent on education, who participates in it and what the outcomes are.
Through independent reviews, the OECD has examined Chinas tertiary education and higher education systems, as well as its vocational education and training system in upper secondary schools. The 2010 Learning for Jobs review highlighted strengths and challenges in Chinas vocational education and training system. www.oecd.org/education www.pearsonfoundation.org/oecd China follows the principle of promoting educational reform through opening up and advancing educational development through reform. We are willing to have enhanced exchange and cooperation with OECD, draw reference from its advanced educational concept, models and evaluation methods, and keep advancing and improving Chinas education through innovation. YUAN GUiReN, Minister of Education
Social Development
Promoting eective consumer policy

Governments have an important role to play in helping consumers understand their rights and protect their interests.
The OECD helps governments design effective consumer policies to support the development of efcient, transparent and fair global markets for consumers. In 2010, a Consumer Policy Toolkit was developed to improve consumer policy making. Both member and partner governments are using the Toolkit to address specic consumer issues. The OECDs work in this area currently focuses on e-commerce and product safety. In the eld of e-commerce, the Guidelines for the Protection of Consumers developed in 1999 are being updated, with a focus on issues concerning mobile and online payments, digital content products and participative e-commerce. China has been actively involved in OECD work on consumer product safety. The countrys General Administration of Quality Supervision, Inspection and Quarantine has participated in a number of OECD events and follows the work of the Working Party on Consumer Product Safety to enhance information sharing with the OECD and other non-member economies. A web-based global database was launched in October 2012 which drew together information on product recalls worldwide. A second database has been developed to help track policy and regulatory developments; a third will provide a platform for sharing information on injuries. Collaboration with China on these fronts will help enhance international cooperation and policy responses when safety concerns arise. www.oecd.org/sti/consumer-policy www.oecd.org/sti/consumer-policy/productsafety
INDUSTRY AND INNOVATION

In the knowledge economy of the 21st Century, science and technology and their applications to industrial and services sectors are major sources of economic growth. As costs and wages rise and competition from other low-cost economies intensies, it has become a pressing issue for China to restructure and upgrade its industrial and services sectors.
38 . IndustrY and Innovation
Industrty & Innovation
Building a knowledge economy

The OECD develops evidence-based policy advice on the contribution of science, technology and innovation to well-being and economic growth.
China is presently implementing its mid-and longterm strategy to become an innovation-based economy by 2020, and to enhance its participation in global value chains (GVCs). The OECD is working closely with China to contribute to policy development in these areas. For more than a decade, China has been an active Participant in the work of the Committee for Scientic and Technological Policy, and has worked with the Organisation in projects on GVCs and knowledge-based capital (KBC). In 2013, China has given support to the OECD Global Forum on the Knowledge Economy, and has joined the Steering Group of the Project on Innovation for Inclusive Development. The OECD has hosted an ofcial from the Ministry of Science and Technology to work on Chinese Public and Private Partnership for innovation. In addition, several publications on science and technology policies including demand-side innovation policy and the OECD Patent Statistics Manual were translated into Chinese. A Memorandum of Understanding was signed with the Development Research Centre of the State Council, with a view to strengthening collaboration on intangibles and KBC. China leads the world in many areas of information and communications technology (ICT). It became the largest exporter of ICT products in 2004, and has the worlds largest mobile phone market. Massive investments in communication infrastructure will help China take advantage of the full benets of the digital economy and address social challenges in education, ageing, public health and poverty reduction. In July 2013 in Beijing, an International Symposium on the Internet Economy was jointly organised with the Ministry of Industry and Information Technology (MIIT), in conjunction with the launch of the Chinese edition of the OECD Internet Economy Outlook 2012. www.oecd.org/sti/stpolicy www.oecd.org/sti/ict www.oecd.org/sti/industryandglobalisation
Launch of the Chinese edition of the OECD Internet Economy Outlook 2012, together with MIIT, 9 July 2013, in Beijing.
IndustrY and Innovation . 39
Meeting transport infrastructure needs

In November 2011, China became the 53rd member of the International Transport Forum (ITF), an intergovernmental organisation based at the OECD that helps shape the transport policy agenda on a global level.
China has been participating at Vice-Ministerial level in the ITF Annual Summits in Leipzig, Germany since 2012. The 2014 Summit will focus on the theme Transport for a Changing World: Understanding Trends Shaping Responses, and will examine how megatrends like new technologies, demographic change, different lifestyles, climate change and the shifting global economic balance will impact transport in the 21st century. It will also look to identify forward-looking policies to ensure that the transport sector contributes to societal goals such as social inclusion, wealth creation and sustainability. In February 2013, the ITF Secretary General met with the Chinese Minister of Transport Yang Chuantang, high level ofcials from the Development Research Centre of the State Council, and various private sector representatives in Beijing. The China Communications Construction Company Group and the China Ocean Shipping Group Company were nominated as 2 members of ITFs newly established Corporate Partnership Board, which will bring expert knowledge from 12 multinational companies in transport and related areas for ITFs policy analysis. The countrys transport statistics are being progressively integrated into ITFs databases and analysis. Earlier in 2013, ITF hosted an ofcial from Chinas Transport Planning and Research Institute of the Ministry of
Transport to work on urban public transport nancing schemes in China. www.internationaltransportforum.org
ITF is one of the most inuential intergovernmental organisations in the transport sector in the world. It serves as an important platform for the transport ministers to explore issues critical to the present situation and the future direction of the sector () China, as one of the rising economies in the world, values the signicance of ITF, and we will continue to work closely with other members to make due contributions to the future direction of ITF. FeNG ZHeNGLiN, Vice Minister of Transport at the ITF Annual Summit, 2-4 May 2012, Leipzig, Germany
Developing rst-class shipbuilding and steelmaking capacity

Shipbuilding China is now the worlds largest shipbuilder in terms of delivery volumes, and the shipbuilding industry plays an important role in Chinas economic development.
China has historically been involved in key activities of the OECD shipbuilding programme and participated actively in negotiations on a multilateral shipbuilding agreement aimed at bringing normal competitive conditions to the shipbuilding sector. The OECD recognises Chinas importance in the global shipbuilding market and aims to intensify its interaction with China. In 2013, the MIIT reafrmed the value of dialogue with the OECD and expressed particular interest in OECDs work on the ocean economy. Over the next few years, the OECD will seek to deepen cooperation with MIIT and other relevant agencies to support Chinas efforts in dealing with the challenges of the shipbuilding industry in a post-crisis world. www.oecd.org/sti/industry-issues
STEEL Today, the worlds capacity to produce steel is nearly twice as high as it was in 2003. China has been at the forefront of this development and continues to play a growing role in the global steel market.
The global steel industry has expanded rapidly over the past decade, in response to growing infrastructure investment, construction and industrial activity, particularly in emerging economies. The country now accounts for almost 50% of global consumption and production of steel. The OECD Steel Committee, an intergovernmental forum for dialogue on challenges facing the global steel industry and policy approaches to promote more open markets for steel, has had a long and productive relationship with China. Representatives from MOFCOM, the China Iron and Steel Association and other key industry stakeholders participate actively in meetings and workshops of the Committee. China has helped shape the international debate on a wide range of issues including steel trade policies, government support measures for steel, structural changes occurring in the industry, raw materials availability, and environmental aspects. China has recently participated in the debate on excess capacity and its consequences, and has joined other major steel-producing economies in reviewing policy options to address the excess capacity challenge. Chinas steel industry is covered extensively in OECD documents and publications on steel. The Steelmaking Capacity Developments in Non-OECD Economies (2013 edition forthcoming) provides in-depth information on investment projects taking place in the Chinese steel
industry, including the technologies invested in and their capacity for steel production. In the area of steelmaking raw materials, China has contributed to past reports that included analyses of Chinas mining sector and mineral policies. www.oecd.org/sti/steel
Enhancing chemical safety

Mutual Acceptance of Data (MAD) OECD supports countries eorts to protect human health and the environment by improving chemical safety, making chemical control policies more transparent and ecient, saving resources for government and industry and preventing unnecessary distortions in the trade of chemicals and chemical products.
The OECD Mutual Acceptance of Data (MAD) system is a multilateral agreement which allows the results of non-clinical safety testing done on chemicals and chemical products in one adhering country to be shared across other adhering countries. This avoids duplicative testing and saves adhering governments and chemical producers over EUR 150 million every year. There has been a long series of dialogue with China on the MAD system. The OECD is currently discussing with China on its provisional adherence to the MAD system, as this could improve Chinas access to international chemical markets by ensuring that safety data developed in China for regulatory submissions to adhering countries will be acceptable for registration or notication of chemicals and chemical products. www.oecd.org/ehs/mad
Nanomaterials and Biotechnology OECD countries are currently working together with the European Commission and China, as well as business and industry, to assess the safety of nine manufactured nanomaterials which are either present on the market or expected to be used in products in the near future. China contributes to OECDs work on iron nanoparticles.
China is also active in the OECD programme that seeks international harmonisation in the area of regulatory assessment of novel foods and feeds in order to ensure the protection of human and animal health. Additionally, China participates in the work of the Working Group on the Harmonisation of Regulatory Oversight in Biotechnology, which aims to ensure that the information and methods used in risk and safety assessment of genetically engineered crops are as similar as possible, with a view to increasing mutual understanding and avoiding duplication. www.oecd.org/env/nanosafety
Pesticides China is active in the OECD Pesticides programme, which helps governments co-operate in assessing and reducing the risks of agricultural pesticides.
In particular, China has translated into Chinese the OECD Test Guidelines on Pesticide Residues, and is disseminating and promoting the use of these Guidelines in the country. China is also working to establish a framework to improve cooperation among governments on ghting international trade of counterfeit pesticides. www.oecd.org/env/pesticides
Boosting tourism
Tourism plays a signicant role in expanding domestic demand and promoting economic growth in China.
In 2012, tourism accounted for almost 4% of the countrys GDP, and the share of tourism expenditure in exports of services was 26%. China is the third most popular tourism destination in the world, with over 57.7 million overnight visitors in 2012, and is also a growing source of visitors for many OECD countries. The OECD monitors policies and structural changes affecting the development of international tourism, and promotes the sustainable economic growth of tourism. The 2014 edition of the OECD Tourism Trends and Policies analyses tourism policies and data from 48 countries, including OECD countries and major emerging tourism economies such as China. www.oecd.org/cfe/tourism
Scan to ACCESS DATA ON CHINA
ENVIRONMENT AND ENERGY

Chinas 12th Five Year Plan is a manifestation of the countrys aspiration to shift towards a green, circular, low-carbon economy and a more sustainable development model. Continued eorts are needed to further improve energy eciency, lower vulnerability to the impact of climate change and promote policies to curb pollution. The OECD has been working on these issues for many years and can support Chinese policymakers in developing and implementing adequate domestic and international policy responses.
46 . Environment and EnergY
Environment & Energy
Towards a cleaner and healthier environment

Economic growth will not be sustainable if pollution and depletion of natural resources are not taken into account in assessing well-being.
Built upon the OECDs Environmental Performance Review of China conducted in 2007, a Memorandum of Understanding between the OECD and Chinas Ministry of Environmental Protection (MEP) identies priority issues of mutual interest and areas where the OECD can support Chinas efforts to move towards a greener economy and build an environment-friendly, resource-saving society. Joint activities have been carried out recently related to environmental taxation, strengthening environmental enforcement and compliance, extended producer responsibility schemes and environmental information. China has contributed to the OECD Database on Instruments Used for Environmental Policies and Natural Resource Management. Following the workshop on Measuring Performance of Environmental Enforcement Authorities in China held in Nanjing in December 2012, the OECD has provided further policy advice to support MEPs pilot initiative on enforcement performance indicators. For instance, a case study on the Extended Producer Responsibility system for e-waste in China will be presented at the OECD Global Forum on Environment, in June 2014 in Japan. www.oecd.org/environment We appreciate the OECDs contributions to strengthening and improving Chinas resources and environment management, and we expect that the OECD will continue to provide support to China in moving toward green development. Environmental Performance Reviews: Mid-Term Progress Report: China (document prepared by the Chinese authorities)
Environment and EnergY . 47
Combating climate change

As is the case for many other countries, China faces the major challenge of reducing its greenhouse gas emissions and lowering its vulnerability to the impacts of climate change, while simultaneously ensuring strong economic growth.
Another major challenge is shifting and scalingup investment in green infrastructure. The OECD is assisting countries in their efforts to nd lasting solutions to nance action against climate change, and to improve the performance of such nance over time. In 2012, the OECD started to develop a Green Investment Policy Framework in order to help governments create the conditions to scale-up private investment in low-carbon and climate-resilient infrastructure. To collect information and lessons on the application of the Framework in different contexts and countries, the OECD is currently conducting case studies which assess barriers to green infrastructure nance and investment. In 2013, a paper was prepared in collaboration with Chinas National Centre for Climate Change Strategy and International Cooperation, to analyse policies, instruments and projects to leverage corporate investment towards sustainable urban development in China. In particular, the paper looked at the interface between infrastructure and land use in Chinas rapidly growing urban areas. Insights from the paper will be incorporated in a synthesis report to be published in 2014. The OECD also provides evidence and guidance to support the integration of climate change adaptation into policymaking. The 2010 paper Plan or React? Analysis of Adaptation Costs and Benets Using Integrated Assessment Models provided estimates of the costs and benets of climate adaptation for China, as well as other countries and regions. The OECD and the International Energy Agency (IEA) jointly support the Climate Change Expert Group on the United Nations Framework Convention on Climate Change (CCXG), which provides analytical input to the international climate change negotiations. China regularly participates in the CCXG seminars to share its experiences with other countries. www.oecd.org/env/cc
Water
The OECD Water Programme promotes the design and implementation of integrated water policies that contribute to peoples health and green growth.
It aims to strengthen institutional and regulatory frameworks and coordination among stakeholders involved in the design and implementation at different levels of government, while assessing governance arrangements and providing guidance for effective public action in water policy. The Programme emphasises the economic dimension of water management and the use of economic instruments to allocate water where it is most needed.
In recent years, cooperation has been established with Chinas Ministry of Water Resources. The OECD and the Ministry will develop an inventory on water resources allocation this year. Besides, China has recently joined the OECD Initiative on Water Governance, which is a multistakeholder network bringing together public, private and not-for prot actors in a policy forum to advance on the global water governance agenda. www.oecd.org/water
Environment and EnergY . 49
Providing clean and aordable energy

The International Energy Agency (IEA), an autonomous body within the OECD, works to ensure reliable, aordable and clean energy for its 28 member countries and beyond.
Widely recognised as the worlds most authoritative source of energy market analysis and projections, the IEA provides critical insights into trends in energy demand and supply and their impact on energy security, environmental protection and economic development. The IEAs work covers large parts of the world including major energy consumers and producers such as China, India, Russia and the OPEC countries. Core IEA publications include the annual World Energy Outlook, medium-term oil, g as, coal, renewables, energy efciency market outlooks, the monthly Oil Market Report and more. In 1996, China and the IEA concluded a Memorandum of Policy Understanding in the Field of Energy to assist China in its transition to a more-sustainable energy economy and to provide a greater understanding of Chinas energy system. The relationship between China and the IEA has strengthened over the years. Throughout 2013, the IEA supported Chinas efforts to advance reform of the natural gas pricing regime and to improve and expand the carbon emissions trading pilot schemes nationwide. At the IEAs November 2013 Ministerial meeting, an updated Joint Statement with China was concluded. This strengthened collaboration for a better common future for energy security, technological research and development, higher quality statistics and environmental sustainability. China, Brazil, India, Indonesia and South Africa also announced their intention to initiate multilateral cooperation with the IEA under the Association Initiative, which will create a multilateral platform for closer collaboration with the IEA and complement the individual bilateral cooperation that has been ongoing for many years. www.iea.org
Developing clean and safe nuclear power

International cooperation is required for a safe, environmentally friendly and economical use of nuclear energy for peaceful purposes.
The Nuclear Energy Agency (NEA) is a specialised agency within the OECD that assists its 31 member countries in maintaining and further developing the scientic, technological and legal bases required for the safe, environmentally friendly and economical use of nuclear energy for peaceful purposes. With the accession of Russia on 1 January 2013, the NEAs membership now accounts for 90% of the worlds nuclear electricity generating capacity. China is very actively pursuing the development of nuclear power as a low-carbon, base load energy source to meet its electricity needs along a sustainable development path. China is currently the largest market for new nuclear build in the world, with 28 reactors under construction at the beginning of 2014. As part of the 12th Five Year Plan, nuclear energy will continue to be developed at a steady pace in order to increase the share of non-fossil fuels and to reduce CO2 emissions. Following the 2011 Fukushima Daiichi nuclear accident, all NEA members using nuclear power carried out comprehensive safety reviews of their nuclear power plants. In China, similar reviews were organised by the National Nuclear Safety Administration of the Ministry of Environmental Protection. In September 2013, NEA published a report on the nuclear safety response and lessons learnt from the Fukushima accident. Increasing participation of China in NEA activities is expected following the conclusion in September 2013 of a Joint Declaration on Cooperation in the Field of Peaceful Uses of Nuclear Energy between the China Atomic Energy Authority (CAEA) and the NEA. China already takes full part in the Multinational Design Evaluation Programme and the Generation IV International Forum, for which the NEA acts as the technical secretariat. www.oecd-nea.org www.gen-4.org
EmploYmentEnvironment and social Development and EnergY . 51
Annexes
Participation in OECD Bodies and Related Organisations Associate in: l Project on Base Erosion and Prot Shifting (since 2013) l International Transport Forum (since 2011) l Global Forum on Transparency and Exchange of Information for Tax Purposes (since 2009) Participant in:
l Programme for International Student Assessment (since
2006) l Committee on Fiscal Aairs and its subsidiary bodies (since 2004) l Committee for Scientic and Technological Policy and its subsidiary bodies (since 2001) Adherence to OECD Instruments
l Multilateral Convention on Mutual Administrative
Participation in OECD Asian Networks l OECD/ADBI Roundtable on Capital Market Reform in Asia (Tokyo Roundtable) l OECD-Asian Roundtable on Corporate Governance l ADB/OECD Anti-Corruption Initiative for the Asia-Pacic l APEC/OECD Cooperative Initiative Regulatory Reform l Network of Senior Budget Ocials for Asia l OECD/ADBI Roundtable on Labour Migration in Asia l OECD Employment and Skills Strategies in Southeast Asia (ESSSA) l OECD Development Centre-AMRO Joint Asian Regional Roundtable
Assistance in Tax Matters (since 2013) l Paris Declaration on Aid Eectiveness (since 2005) l Declaration on Access to Research Data from Public Funding (since 2004) l Declaration on International Science and Technology Cooperation for Sustainable Development (since 2004) l Agricultural Schemes and Codes: Ocial Testing of Agriculture and Forestry Tractors (since 1988)
52 . ANNEXES
The OECD: A Global Policy Network
The Organisation for Economic Co-operation and Development (OECD) is an international organisation helping governments tackle the economic, social and governance challenges of a globalised economy. It provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.
The OECD Member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States of America.
Global Relations Secretariat OECD, 2 rue Andr Pascal 75775 Paris Cedex 16 France www.oecd.org/globalrelations GRS.contact@oecd.org
www.oecd.org/china
March 2014

Active With The People's Republic of China

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Active With The People's Republic of China

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China

ACTIVE WITH the Peoples Republic of

China and the OECD A mutually benecial partnership

THE OECD AND CHINA

THE OECD AND CHINA

4 . ACTIVE WITH THE PEOPLES REPUBLIC OF CHINA

THE OECD AND CHINA

THE OECD AND CHINA . 5

Instruments: Facilitating international coordination and diusion of best practices

6 . ACTIVE WITH THE PEOPLES REPUBLIC OF CHINA

THE OECD AND CHINA

Secondees: oecd-china alumni

THE OECD AND CHINA . 7

SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH

8 . ACTIVE WITH THE PEOPLES REPUBLIC OF CHINA

Maintaining economic resilience

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Sustainable, balanced and inclusive growth . 9

Supporting green growth initiatives

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Promoting regional development and urbanisation

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Sustainable, balanced and inclusive growth . 11

Increasing agricultural productivity and food security

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Promoting development and eective cooperation worldwide

Knowledge sharing through the Development Centre

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Sustainable, balanced and inclusive growth . 13

Better data for better policies

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Sustainable, balanced and inclusive growth . 15

SMOOTH FUNCTIONING OF MARKETS

Enhancing cooperation on international investment

Smooth functioning of marKets . 17

Promoting trade and upgrading in global value chains

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Regulating export credits

Promoting sound competition

20 . Smooth Functioning of marKets

Developing a robust nancial system

URL for this page www.oecd.org/daf/fmt Smooth functioning of marKets . 21

Improving nancial education

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22 . Smooth Functioning of marKets

PUBLIC AND CORPORATE GOVERNANCE

Regulatory reform and administrative simplication

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24 . Public and Corporate Governance

Budgeting and public expenditures

Public and Corporate Governance . 25

Improving tax transparency and compliance

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Fighting transnational corruption

Enhancing public sector integrity

Public and Corporate Governance . 29

Raising the bar on corporate governance

EMPLOYMENT AND SOCIAL DEVELOPMENT

Seeking best practices of social and health policies

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32 . EmploYment and social Development

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