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Growth and Cycles in China's Unbalanced Development: Resource Misallocation, Debt Overhang, Economic Inequality, and the Importance of Structural Reforms

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  • Kevin X.D. Huang

    (Department of Economics, Vanderbilt University, Nashville, TN 37235, USA; Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China)

Abstract

The recent China's growth slowdown is both cyclical and secular, driven by external and internal factors. In this article, I highlight several key internal factors that have hindered China's growth in recent years. These include worsening misallocation of resources and declining growth of total factor productivity, plus rising household income inequality and debt overhang in the face of tightened liquidity constraint. All of these show the urgency for deepening reforms in China's key macroeconomic landscapes in order to remove institutional barriers and distortions deep-rooted in the nation¡¯s economic and financial structure, and to correct fundamental imperfections of its social- economic system. I argue that such reforms are of critical importance for China's pursuit of healthy and sustainable growth and of balanced and adequate development going forward.

Suggested Citation

  • Kevin X.D. Huang, 2019. "Growth and Cycles in China's Unbalanced Development: Resource Misallocation, Debt Overhang, Economic Inequality, and the Importance of Structural Reforms," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 14(1), pages 53-71, March.
    • Handle: RePEc:fec:journl:v:14:y:2019:i:1:p:53-71
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-008-019-0004-8
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    Citations

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    Cited by:

    1. Tang, Rongsheng & Wang, Gaowang, 2021. "Educational mismatch and income inequality," Economic Modelling, Elsevier, vol. 100(C).
    2. Yao Wang & Qiang Yang & Xuenan Wu & Ruichen Wang & Tilei Gao & Yuntong Liu, 2023. "A Study of Trends in Low-Energy Development Patterns in China: A Data-Driven Approach," Sustainability, MDPI, vol. 15(13), pages 1-18, June.
    3. Lida Han & Xi Wu & Peng Tang, 2023. "Does Environmental Decentralization Affect the Supply of Urban Construction Land? Evidence from China," Land, MDPI, vol. 12(3), pages 1-18, March.
    4. Chen, Guowen & Herrera, Ana María & Lugauer, Steven, 2022. "Policy and misallocation: Evidence from Chinese firm-level data," European Economic Review, Elsevier, vol. 149(C).
    5. Tang, Rongsheng & Wang, Gaowang, 2021. "Educational mismatch and earnings inequality," MPRA Paper 106953, University Library of Munich, Germany.
    6. Darong Dai, 2020. "Voting over selfishly optimal tax schedules: Can Pigouvian tax redistribute income?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1660-1686, September.
    7. Dai, Darong & Gao, Wenzheng & Tian, Guoqiang, 2020. "Relativity, mobility, and optimal nonlinear income taxation in an open economy," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 57-82.

    More about this item

    Keywords

    growth slowdown; distortion; resource misallocation; total factor productivity (TFP); debt overhang; income inequality; liquidity constraint; reform;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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