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About the co-editor:
Alfred Schipke has been teaching international finance at Harvard Kennedy School since 1997 and authored and edited a number of books and articles. Since 2013, he is also the IMF Senior Resident Representative for China, where he provides policy advice, leads the analytical research, and coordinates the IMF’s training and technical assistance in China. Previous1y, he was IMF Division Chief in the Asia and Pacific Department coordinating the work on fast-growing low-income countries in southeast Asia (frontier economies) and leading missions to Vietnam. Also, he was a division chief in the IMF’s Western Hemisphere Department in charge of the Latin Caribbean and Eastern Caribbean Currency Union divisions and negotiated a number of IMF programs.
China is at a critical juncture in its economic transformation as it tries to rebalance what is generally seen as an exhausted growth model. There are many dimensions to this rebalancing: from investment to consumption; industry to services; raising factor inputs to boosting productivity and innovation; unequal to more inclusive; and high-pollution to greener growth with sustainable energy use.
A unifying theme across the reforms that will deliver this transformation is that it can no longer be achieved by raising the amount of physical investment and government direction of resource allocation. Instead China is building a new set of policy frameworks that will allow markets to function more effectively. That is not unfettered markets, but markets that work efficiently, in line with broad social and other policy goals, and in a sustainable way. Hence, China is now building a new soft infrastructure, that is, the institutional plumbing that underpins and guides the functioning of markets as the key organizing principle toward achieving sustained economic and social progress.
Unlike investments in physical infrastructure, the benefits of policy frameworks and institutions are often less well understood and more difficult to implement. However, failing to modernize and strengthen policy frameworks could undermine China’s growth potential, trap the country at the middle-income level, and leave its economy and financial system more vulnerable to domestic or external shocks.
This volume provides policymakers, academics, and the public valuable information about policies and institutions in China today. It also looks at the road ahead and key principles that can help in navigating it. The book focuses on issues crucial in the country’s transformation, such as tax policy and administration, social security, state-owned enterprise reform, medium-term expenditure frameworks, the role of local government finances, capital account liberalization, and renminbi internationalization. As China moves toward a more price-based allocation of resources, strengthening monetary policy frameworks and financial sector regulation will be particularly important in channeling resources to the most productive sectors and minimizing the risks of financial sector stress. Also, upgrading statistical frameworks will be critical for macroeconomic policymaking and investors.
"China has redoubled its reform efforts and advanced on a number of fronts, including in the fiscal area. For example, significant progress has been made in completing the value-added tax reform and local government imbalances are being addressed. This book is a comprehensive guide on critical reform issues and provides good insights into China’s fiscal policy frameworks.”
–ZHU Guangyao, Vice Minister, Ministry of Finance, China
“China needs to complement its extraordinary build-up of hardware (infrastructure, factories, housing) with development of the ‘software’ of a market economy—legal system, financial sector, budget management, environmental protection, and social safety net. This book is essential reading to understand China’s challenges and policy frameworks that can help the country meet those challenges.”
–David Dollar, Senior Fellow, China Center, Brookings Institution
“The Chinese economy, at another historical juncture in its development, faces a struggle between new and old. But this time, simply boosting investment would be insufficient to restore robust growth. Instead, the successful transformation of the economy lies in completing institutional reforms that began nearly four decades ago. This timely book provides guidance on how to accomplish this and can help China to achieve the highest possible, sustainable growth rates.”
–HUANG Yiping, Professor, National School of Development, Peking University