The latest OECD Economic Survey of China projects that the Chinese economy will remain the major driver of global growth for the foreseeable future, with per capita GDP on course to almost double by 2020 from 2010 levels. The Survey recommends continued efforts to rebalance the economy from investment to consumption and to address key risks including high corporate debt, excess industrial capacity and inflated housing prices.

“After decades of breath-taking expansion, the focus should be on making growth more resilient, sustainable and inclusive, and addressing risks to stability,” said OECD Secretary-General Angel Gurría. “China’s economy should now be driven less by physical investment and more by innovation, it should deleverage and it should, above all, become greener.”

Financial risks are mounting on the back of rising enterprise debt and over-capacity in some sectors, as well as real estate price exuberance. Debt owed by non-financial firms in China, encouraged by implicit state guarantees to state-owned enterprises (SOEs) and public entities, reached 170% of GDP in 2016, the highest level among leading economies. Two-thirds of enterprise debt is owed by SOEs. Steps to tackle financial risks should include gradually removing implicit guarantees to SOEs and restricting leveraged investment in asset markets.