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Potential output in a rapidly developing economy: the case of China and a comparison with the United States and the European Union

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  • Arne Bigsten
  • Angang Hu
  • Jinghai Zheng

Abstract

The authors use a growth accounting framework to examine growth of the rapidly developing Chinese economy. Their findings support the view that, although feasible in the intermediate term, China's recent pattern of extensive growth is not sustainable in the long run. The authors believe that China will be able to sustain a growth rate of 8 to 9 percent for an extended period if it moves from extensive to intensive growth. They next compare potential growth in China with historical developments in the United States and the European Union. They discuss the differences in production structure and level of development across the three economies that may explain the countries' varied intermediate-term growth prospects. Finally, the authors provide an analysis of "green" gross domestic product and the role of natural resources in China's growth.

Suggested Citation

  • Arne Bigsten & Angang Hu & Jinghai Zheng, 2009. "Potential output in a rapidly developing economy: the case of China and a comparison with the United States and the European Union," Review, Federal Reserve Bank of St. Louis, vol. 91(Jul), pages 317-342.
    • Handle: RePEc:fip:fedlrv:y:2009:i:jul:p:317-342:n:v.91no.4
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    3. Weihong Huang & Yu Zhang, 2017. "Endogenous Fundamental and Stock Cycles," Computational Economics, Springer;Society for Computational Economics, vol. 50(4), pages 629-653, December.
    4. Jinzhao Chen, 2012. "Real Exchange Rate and Economic Growth: Evidence from Chinese Provincial Data (1992 - 2008)," PSE Working Papers halshs-00667467, HAL.
    5. Valenzuela, Jose Maria & Qi, Ye, 2012. "Framing energy efficiency and renewable energy policies: An international comparison between Mexico and China," Energy Policy, Elsevier, vol. 51(C), pages 128-137.
    6. Chang, Xiao & An, Tongliang & Tam, Pui Sun & Gu, Xinhua, 2020. "National savings rate and sectoral income distribution: An empirical look at China," China Economic Review, Elsevier, vol. 61(C).

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