Analysis and Plans, presents an assessment of 1997 survey data and a summary of improvements introduced, as a result of countries' participation in the 1997 Coordinated Portfolio Investment Survey, into national systems for collecting data on international (cross-border) portfolio investment The chapter reviews developments that occurred in international financial markets in the 1980s and 1990s, and the Godeaux Report assessment and recommendations about global data on international portfolio investment flows and stocks. The objectives set for the 1997 survey, the scope of survey results, and the process by which results have been assessed in the chapter. Since publication of the Godeaux Report, substantial expansion and evolution have occurred in exchange and over-the-counter markets for financial derivatives covering a range of financial risks. These markets now have the capacity, in effect, to change the currencies, maturities, and marketability of the financial instruments underlying associated derivative contracts. It is recommended that vigorous efforts should be made to secure the participation of more major investing countries in order to address the under-reporting of global portfolio investment assets and to confirm the reliability of the global data on portfolio investment liabilities.
W. Raphael Lam, Mr. Markus Rodlauer, and Mr. Alfred Schipke
China matters as never before. It is now the second largest economy in the world—and the largest in purchasing power parity. Even at half its historical economic growth rate, it contributes nearly one-third to global growth. In addition, its global export share amounts to about 15 percent, and more than 120 countries count China as their largest trading partner (Figures 1.1 and 1.2) (Ministry of Commerce 2014).
The COVID-19 pandemic has struck amid a preexisting sluggish global growth outlook, historically low nominal interest rates, and low inflation. The pandemic has elevated the need for fiscal policy action to an unprecedented level. For some countries, however, high debt levels and tightening financing conditions are constraining the policy response. But whereas in other economic downturns a key goal of fiscal policy is to stimulate demand, this crisis is like no other—and in its early stages the primary objectives are to boost resources for health care and to provide emergency lifelines to people and firms.
China’s historically high rate of economic growth has gone hand in hand with even faster financial sector development, and its financial system now contains the world’s largest banks, second-largest stock market, and third-largest bond market. Ten years ago the system was relatively conservative and almost completely dominated by banking, but major fiscal stimulus after the global financial crisis and an innovative and competitive financial sector have changed that picture.
Tackling the rising vulnerabilities and low efficiency of state-owned enterprises (SOEs) is crucial to China’s transitioning toward a more sustainable growth path. The need now for bold SOE reforms is similar to the reforms at the end of the 1990s, which, after steadfast implementation, helped unleash the country’s growth potential and secure rapid development in the early 2000s. Successful SOE reform can improve resource allocation, create space for the private sector to flourish, and address major vulnerabilities.
China has achieved tremendous progress in modernizing its economy and is increasingly integrated into the global economy. As the market plays a more decisive role in economic and financial developments, the Chinese government and market participants need accurate and timely information for sound policymaking and investment and consumption decisions. New requirements for data call not only for a broader range of indicators, involving all sectors, but also for more frequent release of timely and high-quality macroeconomic data. China’s economic and financial integration with the rest of the world (Figures 12.1–12.4) also suggests the need for cross-country comparable data to support comparative analysis, the coordination of global economic policies, and informed decision making.
Low growth and investment, adverse shocks, and low inflation and interest rates during the past few years put fiscal policy at the forefront. The COVID-19 pandemic of 2020 has strengthened the case for fiscal policy action and heightened its urgency. In the past few years, growth has been subdued in advanced economies, reflecting various factors including a moderation in capital accumulation (Box 2.1). Sustained high and inclusive growth is critically needed for development in emerging market and developing economies. Inflation has trended down since the 1980s and is currently below targets in two-thirds of inflation-targeting countries. In advanced economies, inflation expectations are anchored at low levels. Nominal interest rates are at historical lows, shifting the balance of cyclical demand support toward fiscal policy. This is because the natural rate of interest—the interest rate that keeps the economy at full employment with stable inflation—is estimated to have fallen significantly and is now below zero in some economies (Rachel and Summers 2019). Consequently, the effective lower bound on policy rates binds more frequently. Moreover, the nominal interest rate on new government borrowing, although at times volatile, is currently negative in many advanced economies (something historically unprecedented). These patterns have been exacerbated by the COVID-19 pandemic (Chapter 1), resulting in a global recession this year, and are likely to persist during the post-shutdown recovery.
Ruud de Mooij, W. Raphael Lam, and Mr. Philippe Wingender
Fiscal reform is integral to China’s broad reform plans and key for achieving more inclusive and sustainable growth. The 13th Five-Year Plan commits to deepening tax reforms to facilitate economic transition, and includes measures to collect revenues more efficiently, improve the fiscal framework, and strengthen local government finances. The authorities decided to establish the foundations of reforms by 2016 and modernize the fiscal framework by 2020.
State-owned enterprises (SOEs) influence the economy and people’s lives through the provision of goods and services in ways that are distinct from, and more varied than, the direct action of governments.1 In many countries, SOEs provide basic services such as water, electricity, and transportation to people and firms, as well as loans to businesses. SOEs are diverse, varying in size, sector of operation, complexity, sophistication, and extent of government ownership and control. Some are essentially an arm of the government, whereas others have a mix of public and private owners (mixed ownership) and a greater commercial focus. Many SOEs are among the largest companies in low-income developing countries, emerging markets, and advanced economies.
China’s tax administration has improved substantially over the past two decades in the face of major changes in the economy and the tax system (see Chapter 2). This has contributed importantly to a doubling of the tax-to-GDP ratio and the significant reduction in taxpayers’ compliance costs since the mid-1990s. As the State Administration of Taxation (SAT) formulates its modernization plan for 2016–20, this chapter examines the results and impacts of previous tax administration reforms, and identifies areas where further reforms are needed to sustain revenue collection and reduce compliance costs over the next five years.