Productivity Growth of the Non-Tradable Sectors in China
AbstractLittle is known about the total factor productivity of the non-tradable sectors in China. In this paper we estimate productivity growth of the non-tradable sectors by studying the relative price movements of the non-tradable sectors vis-a-vis the tradable sectors, i.e. changes in the internal real exchange rate. We find that prices of the non-tradable sectors have risen significantly faster than those of the tradable sectors, and China's internal real exchange rate has appreciated at a faster pace than the renminbi real effective exchange rate. We also find the non-tradable sectors have seen much lower productivity growth than the tradable sectors, and such productivity differentials are large when compared to other economies. We argue that if productivity growth in the non-tradable sectors remains slow, China will likely see more difficulty in rebalancing its growth pattern and higher inflationary pressures in the medium term. As such, it is important for the authorities to take policy actions to raise productivity growth in the non-tradable sectors.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 082012.
Length: 30 pages
Date of creation: Mar 2012
Date of revision:
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Tradable and Non-Tradable Sectors; Internal Real Exchange Rate; Total Factor Productivity;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
- NEP-DEV-2012-03-28 (Development)
- NEP-MAC-2012-03-28 (Macroeconomics)
- NEP-TRA-2012-03-28 (Transition Economics)
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