Modernizing China: Investing in Soft Infrastructure

Books, January 14, 2017

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China is at a critical juncture in its economic transformation as it tries to rebalance what is generally seen as an exhausted growth model.
The transformation can no longer be achieved by raising the amount of physical investment and government direction of resource allocation.
China is building a new set of policy frameworks—soft infrastructure—that will allow markets to function more effectively: not unfettered markets, but markets that work efficiently, in line with broad social and other policy goals, and in a sustainable way.
Soft infrastructure is defined as the institutional plumbing that underpins and guides the functioning of markets as the key organizing principle toward achieving sustained economic and social progress.

The volume provides information about policies and institutions in China today and looks at the road ahead and key principles to help navigate it.
Primary topics addressed:
- Tax policy and administration
- Social security
- State-owned enterprise reform
- Medium-term expenditure frameworks
- Role of local government finances
- Capital account liberalization
- Renminbi internationalization

As China moves toward a more price-based allocation of resources:
- Strengthening monetary policy frameworks will be particularly important in channeling resources to the most productive sectors.
- Strengthening financial sector regulation is needed to minimize the risks of financial sector stress.
Upgrading statistical frameworks is critical for macroeconomic policymaking and for investors.

The volume is aimed at policymakers, academics, and the public, offering valuable information about current policies and institutions and guidance on principles for future reforms.