China's economic miracle will continue - OECD
(AFP)
Updated: 2005-09-16 15:49

With China's private sector now the dominant player in many industries and a bigger creator of jobs than the state, the regulatory framework still does not meet the needs of private businesses, while poorly performing state-owned companies "are in dire need of restructuring," it said.

To stimulate the growth of private enterprises, China must revise its
corporate law, pass bankruptcy laws and improve the quality of its judicial and law enforcement systems, the report said.

"Further development of the capital markets will help to lower enterprise debt loads, reduce the exposure of the banking sector to commercial risks, facilitate restructuring and ownership change of enterprises, and improve market discipline over business behaviour," it said.

It said Chinese stock markets continue to be hampered by government-imposed factors, including a preference to only list state-owned companies, non-commercial criteria for new listings and restrictions on the participation of financial institutions.

Continued banking and finance reforms were essential, especially
improvements in corporate governance in banks, while greater exchange rate flexibility would also allow the government to better control inflationary pressures and investment flows.