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Understanding the Slowing Growth Rate of the People's Republic of China

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  • Dwight H. Perkins

    (Harold Hitchings Burbank Professor of Political Economy, Emeritus, Department of Economics, Harvard University)

Abstract

It is increasingly accepted that the gross domestic product (GDP) growth rate of the People's Republic of China (PRC) is slowing down, but the reasons for the slowdown are not yet well understood. Part of the reason is that growth in all countries that reach high-income status slows down when they reach a global research income level that is still far below the level of the highest income countries. In the PRC, on the supply side, this is happening because total factor productivity (TFP) is slowing down whereas, because of slowing labor force growth, it would have to increase in order to maintain near double-digit GDP growth. On the demand side, a low share of household income in GDP has required the PRC to maintain an unusually high rate of investment in transport infrastructure and housing, but the rapid growth in both of these areas is coming to an end. Environmental investment could take up the slack and keep aggregate demand at a level that would fully employ resources. Finally, the PRC has reached the point where the manufacturing share of GDP has peaked and will begin to decline as the economy becomes increasingly service based, but services seldom grow at the double-digit rates that manufacturing is sometimes capable of.

Suggested Citation

  • Dwight H. Perkins, 2015. "Understanding the Slowing Growth Rate of the People's Republic of China," Asian Development Review, MIT Press, vol. 32(1), pages 1-30, March.
    • Handle: RePEc:tpr:adbadr:v:31:y:2015:i:2:p:1-30
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00040
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    References listed on IDEAS

    as
    1. Nicholas R. Lardy, 2014. "Markets over Mao: The Rise of Private Business in China," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6932, October.
    2. CAI, Fang & DU, Yang, 2011. "Wage increases, wage convergence, and the Lewis turning point in China," China Economic Review, Elsevier, vol. 22(4), pages 601-610.
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    Cited by:

    1. Damoah, Kaku Attah & Giovannetti, Giorgia & Marvasi, Enrico, 2022. "Do country centrality and similarity to China matter in the allocation of belt and road projects?," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 660-674.
    2. Kaku Attah Damoah & Giorgia Giovannetti & Enrico Marvasi, 2023. "Five Stylized Facts on Belt and Road Countries and Their Trade Patterns," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(1), pages 149-181, January.
    3. Jong-Wha Lee, 2017. "China's economic growth and convergence," The World Economy, Wiley Blackwell, vol. 40(11), pages 2455-2474, November.
    4. Guonan Ma & Ivan Roberts & Gerard Kelly, 2016. "A Rebalancing Chinese Economy: Challenges and International Implications," RBA Annual Conference Volume (Discontinued), in: Iris Day & John Simon (ed.),Structural Change in China: Implications for Australia and the World, Reserve Bank of Australia.
    5. Huang, Yiping, 2016. "Understanding China's Belt & Road Initiative: Motivation, framework and assessment," China Economic Review, Elsevier, vol. 40(C), pages 314-321.

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    More about this item

    Keywords

    GDP; China; total factor productivity; environmental investment; slow growth rate;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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