China’s Economic Growth 1978-2025: What We Know Today about China’s Economic Growth Tomorrow

Views of the future China vary widely. While some believe that the collapse of China is inevitable, others see the emergence of a new superpower that increasingly poses a threat to the U.S. This paper examines the economic growth prospects of China over the next two decades. Extrapolating past real GDP growth rates into the future, the size of the Chinese economy surpasses that of the U.S. in purchasing power terms between 2012 and 2015; by 2025, China is likely to be the world's largest economic power by almost any measure. The extrapolations are supported by two types of considerations. First, China’s growth patterns of the past 25 years since the beginning of economic reforms match well those identified by standard economic development and trade theories (structural change, catching up, and factor price equalization). Second, decomposing China’s GDP growth into growth of labor and other variables, the near-certain information available today about the quantity and quality of Chinese laborers through 2015 and possibly several years after allows inferences about future GDP growth. Short of some cataclysmic event, and given a continuation of the generally sound economic policies of the past, demographics alone suggests China’s continued economic rise. If talent is randomly distributed in the world population and if agglomeration of talent is important, then the odds are strongly in China’s favor.economic growth, growth accounting, growth forecasts, development theories, human capital formation, education (all: China)

New Capital Estimates for China

Data on physical capital are an indispensable part of economic growth and efficiency studies. In the case of China, fixed asset time series are usually derived either by aggregating gross fixed capital formation data over time, net of depreciation, or by correcting the limited official fixed asset data available. These procedures, to varying degrees, ignore that (i) gross fixed capital formation does not equal investment, (ii) investment does not equal the value of fixed assets newly created through investment, (iii) depreciation is an accounting measure that has no impact on changes in the production capacity of fixed assets, (iv) official fixed asset data, where available, incorporate significant revaluations in the 1990s, and (v) the variable 'net fixed assets,' frequently used in the literature, is an inappropriate measure of fixed assets for the purpose of growth or efficiency studies. This paper derives economy-wide fixed asset values for 1954-2002, correcting for these shortcomings. It also uses the so far unexplored method of combining economy-wide depreciation data (in the income approach to the calculation of gross domestic product) with an economy-wide depreciation rate to directly yield economy-wide fixed assets. The fixed asset time series derived here are contrasted with each other as well as with those presented in the literature. The reliability of the different series is evaluated, leading to the recommendation of a specific choice of fixed asset time series.Capital, fixed assets, investment, national income accounting, production function estimations, measurement of economic growth, Chinese statistics

China’s Economic Growth 1978-2025: What We Know Today about China’s Economic Growth Tomorrow

Views of the future China vary widely. While some believe that the collapse of China is inevitable, others see the emergence of a new superpower that increasingly poses a threat to the U.S. This paper examines the economic growth prospects of China over the next two decades. Extrapolating past real GDP growth rates into the future, the size of the Chinese economy surpasses that of the U.S. in purchasing power terms between 2012 and 2015; by 2025, China is likely to be the world's largest economic power by almost any measure. The extrapolations are supported by two types of considerations. First, China’s growth patterns of the past 25 years since the beginning of economic reforms match well those identified by standard economic development and trade theories (structural change, catching up, and factor price equalization). Second, decomposing China’s GDP growth into growth of labor and other variables, the near-certain information available today about the quantity and quality of Chinese laborers through 2015, if not several years after, allows inferences about future GDP growth. Short of some cataclysmic event, demographics alone suggests China’s continued economic rise. If talent is randomly distributed in the world population and if agglomeration of talent is important, then the odds are strongly in China’s favor.economic growth, growth accounting, growth forecasts, development theories, human capital formation, education (all: China)

New Capital Estimates for China

Data on physical capital are an indispensable part of economic growth and efficiency studies. In the case of China, economy-wide fixed asset series are usually derived by aggregating gross fixed capital formation (net of depreciation) over time, and sectoral/ownership-specific series by correcting the limited official fixed asset data available. These procedures, to varying degrees, ignore that (i) gross fixed capital formation does not equal investment, (ii) investment does not equal the value of fixed assets newly created through investment, (iii) depreciation is an accounting measure that bears no necessary relation to changes in the production capacity of fixed assets, (iv) official fixed asset data, where available, incorporate significant revaluations in the 1990s, and (v) “net fixed assets” do not measure the contribution of fixed assets to production. This paper derives economy-wide fixed asset values for 1953-2003, correcting for these shortcomings. It uses both the traditional, cumulative approach and a new, so far unexplored method of combining economy-wide depreciation values and an economy-wide depreciation rate to directly yield economy-wide fixed assets. The derived fixed asset time series are evaluated in a comparison with each other as well as with series in the literature, leading to the recommendation of a specific choice of fixed asset time series.Capital, investment, national income accounting, production function estimations, Chinese statistics, fixed assets, measurement of economic growth

Spatial Price Differences in China: Estimates and Implications

Prices differ across space: from province to province, from rural (or urban) areas in one province to rural (or urban) areas in another province, and from rural to urban areas within one province. Systematic differences in prices across a range of goods and services in different localities imply regional differences in the costs of living. If high- income provinces also have high costs of living, and low-income provinces have low costs of living, the use of nominal income measures in explaining such economic outcomes as inequality can lead to misinterpretations. Income should be adjusted for costs of living. We are interested in the sign and magnitude of the adjustments needed, their changes over time, and their impact on economic outcomes in China. In this article, we construct a set of (rural, urban, total) provincial- level spatial price deflators for the years 1984-2002 that can be used to obtain provincial-level income measures adjusted for purchasing power. We provide illustrations of the significant effect of ignoring spatial price differences in the analysis of China's economy.

China's Investment Rate: Implications and Data Reliability

For the past nearly forty years, China has experienced average annual real GDP growth of close to ten percent, much of it driven by investment and capital accumulation. By 2014, gross capital formation had reached 46 percent of aggregate expenditures. This paper documents the role of investment in driving economic growth in China, questions how much longer China can sustain a relatively high investment rate, and examines the arguments that have been offered for an impending drastic reduction in investment. The quality of the investment statistics and of the gross fixed capital formation statistics (the latter as part of the national income and product accounts) is assessed; these data are potentially problematic with no easy way for researchers to improve the data. The paper finally makes the point that investment in China remains broad-based across all economic sectors, with little specialization in sight; the size of the Chinese economy would appear to allow comprehensive development across all economic sectors. At the same time, the relative size of foreign investment in China has become negligible and the China growth story thus has become a domestic one

Monthly industrial output in China since 1983

Monthly economic indicators are used for a variety of purposes, from studying business cycles to determining economic policy and making informed business decisions. China’s published monthly industrial output statistics could hardly be more confusing, with changes in variables, in coverage, in measurement, and in presentation. This paper reviews the available official data and proceeds to construct a monthly industrial output series in nominal terms and in real terms for the period since May 1983, economy-wide and for the state sector

The Unfinished Business of State-owned Enterprise Reform in the People’s Republic of China

This paper examines the progress of state-owned enterprise (SOE) reform in the People’s Republic of China. After defining SOEs and considering their scope of operation within the PRC economy, the focus of the paper is on the major reform waves that followed the deterioration of SOE profitability in the early 1990s. The oil industry serves to illustrate industry-specific SOE reform trends as well as the latest reform developments. Until today, a stable, successful, long-term arrangement of state ownership has remained elusive. SOE reform is incomplete as long as a number of fundamental governance issues are not resolved. But these are difficult to resolve in the context of Party-controlled state-owned enterprises

China's Investment Rate: Implications and Data Reliability

For the past nearly forty years, China has experienced average annual real GDP growth of close to ten percent, much of it driven by investment and capital accumulation. By 2014, gross capital formation had reached 46 percent of aggregate expenditures. This paper documents the role of investment in driving economic growth in China, questions how much longer China can sustain a relatively high investment rate, and examines the arguments that have been offered for an impending drastic reduction in investment. The quality of the investment statistics and of the gross fixed capital formation statistics (the latter as part of the national income and product accounts) is assessed; these data are potentially problematic with no easy way for researchers to improve the data. The paper finally makes the point that investment in China remains broad-based across all economic sectors, with little specialization in sight; the size of the Chinese economy would appear to allow comprehensive development across all economic sectors. At the same time, the relative size of foreign investment in China has become negligible and the China growth story thus has become a domestic one

Monthly industrial output in China since 1983

Monthly economic indicators are used for a variety of purposes, from studying business cycles to determining economic policy and making informed business decisions. China’s published monthly industrial output statistics could hardly be more confusing, with changes in variables, in coverage, in measurement, and in presentation. This paper reviews the available official data and proceeds to construct a monthly industrial output series in nominal terms and in real terms for the period since May 1983, economy-wide and for the state sector