Challenges for the Future of Chinese Economic Growth

32 Pages Posted: 30 May 2017

See all articles by Jane Haltmaier

Jane Haltmaier

Board of Governors of the Federal Reserve System

Date Written: 2013

Abstract

The Chinese economy has been growing at a rapid pace for over thirty years. Most of this growth has come from higher labor productivity, while growth of employment has diminished along with a slower rate of increase in the working-age population. This paper looks at the challenges that China will face over the next two decades in maintaining its rapid pace of economic growth, especially as working-age population growth slows further and then begins to decline. Key questions include whether China will be able to continue to devote nearly half of its GDP to investment, whether such investment will become less productive as the capital-labor ratio continues to rise, whether labor participation and employment rates will fall as the population becomes less rural, and whether future shifts out of rural employment will go more toward the services rather than the manufacturing sector, where productivity is higher. In the baseline scenario economic growth falls gradually from its current pace of about 10 percent to near 6½ percent by 2030. However, a combination of less optimistic, but still reasonable assumptions, results in a reduction in the growth rate to about 1½ percent by 2030.

Suggested Citation

Haltmaier, Jane, Challenges for the Future of Chinese Economic Growth (2013). FRB International Finance Discussion Paper No. 1072. Available at SSRN: https://ssrn.com/abstract=2976766

Jane Haltmaier (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2374 (Phone)
202-736-5638 (Fax)

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