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China's Growth Slowdown: Lessons from Japan's Experience and the Expected Impact on Japan, the USA and Germany

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  • Guanghua Wan
  • Peter J. Morgan
  • Kyoji Fukao
  • Tangjun Yuan

Abstract

China is switching from economic growth based on extremely rapid capital accumulation to economic growth based on structural reforms and accelerated total factor productivity growth. Meanwhile, China will also face a serious excess saving problem as capital accumulation slows and, hence, needs to reduce its private saving rate. Based on this analysis, we estimated the economic impact of China's growth slowdown and hypothetical economic transformation on Japan, the USA and Germany using the world input–output database. We compared the following three scenarios for China's final demand in 2020 and economic growth from 2015 to 2020: (i) an optimistic scenario (GDP growth rate = 6.2%, investment/GDP = 0.501); (ii) a slowdown scenario (GDP growth rate = 4%, investment/GDP = 0.501); and (iii) a structural reform scenario (GDP growth rate = 6.2%, investment/GDP = 0.3). Our analysis suggests that Japan and Germany would suffer more from structural reforms in China than from a slowdown in growth. Meanwhile, for the USA, the employment decline triggered by structural reforms would be much smaller than the employment decline caused by a slowdown in growth.

Suggested Citation

  • Guanghua Wan & Peter J. Morgan & Kyoji Fukao & Tangjun Yuan, 2016. "China's Growth Slowdown: Lessons from Japan's Experience and the Expected Impact on Japan, the USA and Germany," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(5), pages 122-146, September.
    • Handle: RePEc:bla:chinae:v:24:y:2016:i:5:p:122-146
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    File URL: http://hdl.handle.net/10.1111/cwe.12177
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    References listed on IDEAS

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    1. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    2. Broadberry, Stephen & Fukao, Kyoji & Zammit, Nick, 2015. "How Did Japan Catch-up On The West? A Sectoral Analysis Of Anglo-Japanese Productivity Differences, 1885-2000," CAGE Online Working Paper Series 231, Competitive Advantage in the Global Economy (CAGE).
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    4. Jorgenson, Dale W. & Kuroda, Masahiro & Nishimizu, Mieko, 1987. "Japan-U.S. industry-level productivity comparisons, 1960-1979," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 1-30, March.
    5. Charles Yuji Horioka, 2008. "The Flow of Household Funds in Japan," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 4(1), pages 37-52, December.
    6. Harry WU, 2015. "Accounting for the Sources of Growth in the Chinese Economy," Discussion papers 15048, Research Institute of Economy, Trade and Industry (RIETI).
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    Cited by:

    1. Guanghua Wan & Peter J. Morgan & Justin Yifu Lin & Guanghua Wan & Peter J. Morgan, 2016. "Factors Affecting the Outlook for Medium-term to Long-term Growth in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(5), pages 20-41, September.
    2. Jianxin Wu & Yanrui Wu & Bing Wang, 2018. "Local Government Debt, Factor Misallocation and Regional Economic Performance in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 26(4), pages 82-105, July.

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