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Challenges for the future of Chinese economic growth

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  • Jane Haltmaier
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    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.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 1072.

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    Date of creation: 2013
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    Handle: RePEc:fip:fedgif:1072

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    1. Barry Eichengreen & Donghyun Park & Kwanho Shin, 2011. "When Fast Growing Economies Slow Down: International Evidence and Implications for China," NBER Working Papers 16919, National Bureau of Economic Research, Inc.
    2. Yanrui Wu, 2009. "China's Capital Stock Seris By Region and Sector," Economics Discussion / Working Papers 09-02, The University of Western Australia, Department of Economics.
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