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What Does the Lewis Turning Point Mean for China? A Computable General Equilibrium Analysis

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Author Info

  • Huang Yiping

    (China Center for Economic Research)

  • Jiang Tingsong

Abstract

We apply a computable general equilibrium framework to assess likely impacts of the Lewis turning point on China and the rest of the world. Modeling results suggest that China will probably transition from an abnormal economy to a normal economy with somewhat lower growth but higher inflation, which requires significant revision to the macroeconomic policy framework. China would lose competitiveness in laborintensive activities, its current account surplus should fall but overinvestment risk could rise. These changes in China should help improve other counties current accounts and boost lowcost countries production. The Lewis turning point, however, does not provide automatic solutions to some of the key challenges, such as service sector development and innovation capability. China will need to make serious policy efforts to avoid the socalled middle income trap.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22718.

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Date of creation: Jan 2010
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Handle: RePEc:eab:macroe:22718

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Related research

Keywords: Lewis turning point; labor shortage; general equilibrium analysis; normal economy; middleâ€ÂÂincome trap;

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  1. Indermit Gill & Homi Kharas, 2007. "An East Asian Renaissance : Ideas for Economic Growth," World Bank Publications, The World Bank, The World Bank, number 6798, February.
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Cited by:
  1. Vandana Chandra & Justin Yifu Lin & Yan Wang, 2013. "Leading Dragon Phenomenon: New Opportunities for Catch-up in Low-Income Countries," Asian Development Review, MIT Press, MIT Press, vol. 30(1), pages 52-84, March.

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