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What does the Lewis turning point mean for China? A computable general equilibrium analysis

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  • Yiping Huang
  • Tingsong Jiang

Abstract

We apply a computable general equilibrium framework to assess likely impacts of the Lewis turning point (LTP) on China and the rest of the world. Modeling results suggest that China will probably transition from an abnormal economy to a normal economy with somewhat lower growth but higher inflation, which requires significant revision to the macroeconomic policy framework. China would lose competitiveness in labor-intensive activities, its current account surplus should fall but overinvestment risk could rise. These changes in China should help improve other countries' current accounts and boost low-cost countries' production. The LTP, however, does not provide automatic solutions to some of the key challenges, such as service sector development and innovation capability. China will need to make serious policy efforts to avoid the so-called ‘middle-income trap’.

Suggested Citation

  • Yiping Huang & Tingsong Jiang, 2010. "What does the Lewis turning point mean for China? A computable general equilibrium analysis," China Economic Journal, Taylor & Francis Journals, vol. 3(2), pages 191-207.
    • Handle: RePEc:taf:rcejxx:v:3:y:2010:i:2:p:191-207
    DOI: 10.1080/17538963.2010.511920
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    Cited by:

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    2. Longfeng Ye & Peter E. Robertson, 2017. "Migration and Growth in China: A Sceptical Assessment of the Evidence," Economics Discussion / Working Papers 17-03, The University of Western Australia, Department of Economics.
    3. Vandana Chandra & Justin Yifu Lin & Yan Wang, 2013. "Leading Dragon Phenomenon: New Opportunities for Catch-up in Low-Income Countries," Asian Development Review, MIT Press, vol. 30(1), pages 52-84, March.
    4. Zhuan Xie & Xiaobo Zhang, 2015. "The patterns of patents in China," China Economic Journal, Taylor & Francis Journals, vol. 8(2), pages 122-142, May.
    5. Garnaut, Ross, . "Australia and resources in the Asian century," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(3).
    6. Ye, Longfeng & Robertson, Peter E., 2019. "Hitting the Great Wall: Structural change and China's growth slowdown," China Economic Review, Elsevier, vol. 56(C), pages 1-1.

    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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