China's economic growth and convergence

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Abstract

Using cross-country panel data, this study identifies and discusses major factors contributing to China's strong growth in the past four decades. China's low initial per capita income relative to its own long-run potential, combined with sound policy factors including a high investment rate, strong human capital, high trade openness and improved institutions, enabled the economy to converge with advanced economies in terms of income level. The shift-share analysis with industry-level data shows that strong labour productivity growth in the manufacturing sector largely contributed to China's overall labour productivity growth. Although labour reallocation from agriculture to the services sector made a positive contribution to aggregate labour productivity growth, labour productivity growth in the services sector itself was negative over the 1980–2010 period. China's average potential GDP growth is predicted to decline significantly in the coming decade, to 5%–6% and fall further to 3%–4%—due to the convergence effect and structural problems—unless China substantially upgrades its institutions and policy factors and improves productivity, particularly in its services sector.

Original languageEnglish
Pages (from-to)2455-2474
Number of pages20
JournalWorld Economy
Volume40
Issue number11
DOIs
Publication statusPublished - 2017 Nov 1

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Keywords

  • China
  • convergence
  • economic growth
  • productivity
  • structural change

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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