Trends and Cycles in China's Macroeconomy

76 Pages Posted: 11 May 2018 Last revised: 26 Sep 2023

Multiple version iconThere are 3 versions of this paper

Date Written: April 2018


This working paper was written by Chun Chang (Shanghai Jiao Tong University), Kaiji Chen (Emory University), Daniel F. Waggoner (Federal Reserve Bank of Atlanta) and Tao Zha (Emory University and Federal Reserve Bank of Atlanta).

Although the non-financial corporate sector accounts for the lion’s share of the post-Global Financial Crisis. We make four contributions in this paper. First, we provide a core of macroeconomic time series usable for systematic research on China. Second, we document, through various empirical methods, the robust findings about striking patterns of trend and cycle. Third, we build a theoretical model that accounts for these facts. Fourth, the model’s mechanism and assumptions are corroborated by institutional details, disaggregated data, and banking time series, all of which are distinctive of Chinese characteristics. We argue that preferential credit policy for promoting heavy industries accounts for the unusual cyclical patterns as well as the post-1990s economic transition featured by the persistently rising investment rate, the declining labor income share, and a growing foreign surplus. Th e departure of our theoretical model from standard ones offers a constructive framework for studying China’s modern macroeconomy.

Keywords: Reallocation, between-sector effect, TFP growth, heavy vs. light sectors, long-term vs. short-term loans, labor share, lending frictions, incentive compatibility

JEL Classification: E, F4, G1

Suggested Citation

Institute for Monetary and Financial Research, Hong Kong, Trends and Cycles in China's Macroeconomy (April 2018). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 12/2018, NBEER Macroeconomics Annual, Vol. 30, 2015, Available at SSRN: or

Hong Kong Institute for Monetary and Financial Research (Contact Author)

(HKIMR) ( email )

Units 1005-1011, 10th Floor, One Pacific Place
88 Queensway
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics