China should take actions to cope with its falling total factor productivity (TFP), a senior expert with a government think tank said Sunday. China's TFP growth slowed from an annual 3.9 percent between 1995 and 2009 to 3.1 percent in the 2011-2015 period, according to Cai Fang, vice president of the Chinese Academy of Social Sciences. He predicted that China's TFP growth will further drop to 2.7 percent in the next five years.
To increase TFP and foster new growth areas, China should reform its household registration system to help farmers settle down in cities, according to him. The country needs to overhaul its education system, expand compulsory education to more people, and increase the quality of labor force.
Cai also called for more efforts to solve overcapacity problems in many sectors and actions to lower leverage ratios. In addition, the government needs to create a policy environment where promising enterprises can easily enter the market and non-competitive ones are forced to exit.
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