How Fast Can China Grow? The Middle Kingdom's Prospects to 2030

27 Pages Posted: 22 May 2019

See all articles by Jeannine Bailliu

Jeannine Bailliu

Bank of Canada

Mark Kruger

Government of Canada - Bank of Canada

Argyn Toktamyssov

affiliation not provided to SSRN

Wheaton Welbourn

Government of Canada - Bank of Canada

Date Written: May 2019

Abstract

Given its size and importance for global commodity markets, the question of how fast China can grow over the medium term is an important one. Using a Cobb–Douglas production function, we decompose the growth of trend GDP into those of the capital stock, labour, human capital and total factor productivity (TFP) and then forecast trend output growth out to 2030 using a bottom‐up approach based on forecasts that we build for each one of these factors. Our paper distinguishes itself from existing work in that we construct a forecast of Chinese TFP growth based on the aggregation of forecasts of its key determinants. In addition, our analysis is based on a carefully constructed estimate of the Chinese productive capital stock and a measure of human capital (based on Chinese wage survey data) that better reflects the returns to education in China. Our results suggest that Chinese GDP growth will slow from around 7% currently to approximately 5% by 2030, consistent with a gradual rebalancing of the Chinese economy characterized by a decline in the investment rate. Moreover, our findings underscore the growing importance of TFP growth as a driver of Chinese growth.

Suggested Citation

Bailliu, Jeannine and Kruger, Mark and Toktamyssov, Argyn and Welbourn, Wheaton, How Fast Can China Grow? The Middle Kingdom's Prospects to 2030 (May 2019). Pacific Economic Review, Vol. 24, Issue 2, pp. 373-399, 2019, Available at SSRN: https://ssrn.com/abstract=3391978 or http://dx.doi.org/10.1111/1468-0106.12240

Jeannine Bailliu (Contact Author)

Bank of Canada ( email )

Ottawa, Ontario K1A 0G9
Canada
613-782-7474 (Phone)
613-782-7658 (Fax)

Mark Kruger

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Argyn Toktamyssov

affiliation not provided to SSRN

Wheaton Welbourn

Government of Canada - Bank of Canada

234 Wellington Street
Ontario, K1A 0G9
Canada

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