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How fast can China grow? The Middle Kingdom's prospects to 2030

Author

Listed:
  • Jeannine Bailliu
  • Mark Kruger
  • Argyn Toktamyssov
  • Wheaton Welbourn

Abstract

Given its size and importance for global commodity markets, the question of how fast China can grow over the medium term is an important one. Using a Cobb–Douglas production function, we decompose the growth of trend GDP into those of the capital stock, labour, human capital and total factor productivity (TFP) and then forecast trend output growth out to 2030 using a bottom‐up approach based on forecasts that we build for each one of these factors. Our paper distinguishes itself from existing work in that we construct a forecast of Chinese TFP growth based on the aggregation of forecasts of its key determinants. In addition, our analysis is based on a carefully constructed estimate of the Chinese productive capital stock and a measure of human capital (based on Chinese wage survey data) that better reflects the returns to education in China. Our results suggest that Chinese GDP growth will slow from around 7% currently to approximately 5% by 2030, consistent with a gradual rebalancing of the Chinese economy characterized by a decline in the investment rate. Moreover, our findings underscore the growing importance of TFP growth as a driver of Chinese growth.

Suggested Citation

  • Jeannine Bailliu & Mark Kruger & Argyn Toktamyssov & Wheaton Welbourn, 2019. "How fast can China grow? The Middle Kingdom's prospects to 2030," Pacific Economic Review, Wiley Blackwell, vol. 24(2), pages 373-399, May.
    • Handle: RePEc:bla:pacecr:v:24:y:2019:i:2:p:373-399
    DOI: 10.1111/1468-0106.12240
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    Cited by:

    1. Jeannine Bailliu & Doga Bilgin & Kun Mo & Kurt Niquidet & Benjamin Sawatzky, 2019. "Global Commodity Markets and Rebalancing in China: The Case of Copper," Discussion Papers 2019-3, Bank of Canada.
    2. Edoardo Beretta & Claudio Cesaroni & Federico Tsipas, 2025. "The new “normal” of China’s economy after Covid-19 and its impact on trading partners: the case of Italy," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 15(3), pages 571-591, September.
    3. Mingyue Wang & Yu Liu & Yawen Liu & Shunxiang Yang & Lingyu Yang, 2018. "Assessing Multiple Pathways for Achieving China’s National Emissions Reduction Target," Sustainability, MDPI, vol. 10(7), pages 1-16, June.
    4. Dieppe, Alistair & Gilhooly, Robert & Han, Jenny & Korhonen, Iikka & Lodge, David, 2018. "The transition of China to sustainable growth – implications for the global economy and the euro area," Occasional Paper Series 206, European Central Bank.
    5. Wagner, Helmut, 2018. "Structural change, rebalancing, and the danger of a middle-income trap in China," BOFIT Policy Briefs 6/2018, Bank of Finland Institute for Emerging Economies (BOFIT).
    6. Takatoshi Sasaki & Tomoya Sakata & Yui Mukoyama & Koichi Yoshino, 2021. "China's Long-Term Growth Potential: Can Productivity Convergence Be Sustained?," Bank of Japan Working Paper Series 21-E-7, Bank of Japan.
    7. Glawe, Linda & Wagner, Helmut, 2020. "China in the middle-income trap?," China Economic Review, Elsevier, vol. 60(C).
    8. Richard Beard & Anne-Katherine Cormier & Michael Francis & Katerina Gribbin & Justin-Damien Guénette & Christopher Hajzler & Kristina Hess & James Ketcheson & Kun Mo & Louis Poirier & Peter Selcuk, 2018. "Assessing Global Potential Output Growth: April 2018," Staff Analytical Notes 2018-9, Bank of Canada.
    9. Patrick Alexander & Michael Francis & Christopher Hajzler & Kristina Hess & Patrick Kirby & Louis Poirier & Sri Thanabalasingam, 2017. "Assessing Global Potential Output Growth," Staff Analytical Notes 17-3, Bank of Canada.
    10. Lodge, David & Soudan, Michel, 2019. "Credit, financial conditions and the business cycle in China," Working Paper Series 2244, European Central Bank.
    11. Wagner, Helmut, 2018. "Structural change, rebalancing, and the danger of a middle-income trap in China," CEAMeS Discussion Paper Series 13/2018, University of Hagen, Center for East Asia Macro-economic Studies (CEAMeS).
    12. Manu, Ana-Simona & McAdam, Peter & Willman, Alpo, 2018. "The role of factor substitution and technical progress in China's great expansion," Working Paper Series 2180, European Central Bank.
    13. Yanying Zhang & Yiuman Tse & Gaiyan Zhang, 2022. "Return predictability between industries and the stock market in China," Pacific Economic Review, Wiley Blackwell, vol. 27(2), pages 194-220, May.

    More about this item

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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