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The Neoclassical Growth of China

Author

Listed:
  • Jesús Fernández-Villaverde
  • Lee Ohanian
  • Wen Yao

Abstract

This paper studies China’s four-fold increase in per capita GDP relative to the U.S. between 1995 and 2019. First, we argue that China’s growth pattern is very similar to that of several other East Asia economies that initially grew very quickly. Second, we show that a minimalist Ramsey-Cass-Koopmans model with a parsimonious TFP catch-up process can account for China’s growth path and the growth paths of other East Asia economies at a similar stage of development. The growth paths of other East Asia economies and the model predictions suggest that China’s growth will substantially slow, so much so that we find the U.S. growth rate will likely be higher than China’s by 2043. We also find that China’s income per capita will level off at roughly 44% of the U.S. level around 2100.

Suggested Citation

  • Jesús Fernández-Villaverde & Lee Ohanian & Wen Yao, 2023. "The Neoclassical Growth of China," CESifo Working Paper Series 10499, CESifo.
    • Handle: RePEc:ces:ceswps:_10499
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    References listed on IDEAS

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    1. Naughton, Barry J., 2018. "The Chinese Economy: Adaptation and Growth, second edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262534797, December.
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    3. Karl Whelan, 2002. "A Guide To U.S. Chain Aggregated Nipa Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(2), pages 217-233, June.
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    5. Herd,Richard, 2020. "Estimating Capital Formation and Capital Stock by Economic Sector in China : The Implications for Productivity Growth," Policy Research Working Paper Series 9317, The World Bank.
    6. Alwyn Young, 1992. "A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 13-64, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Jesús Fernández-Villaverde & Tomohide Mineyama & Dongho Song, 2026. "How Globalization Unravels: A Ricardian Model of Endogenous Trade Policy," NBER Working Papers 34672, National Bureau of Economic Research, Inc.
    2. Akira Kohsaka, 2026. "China Meets Global De-Industrialization: Industrial Structural Transformation of China," OSIPP Discussion Paper 26E002, Osaka School of International Public Policy, Osaka University.
    3. Fernández-Villaverde, Jesús & Ventura, Gustavo & Yao, Wen, 2025. "The wealth of working nations," European Economic Review, Elsevier, vol. 173(C).
    4. Ron P. Smith, 2024. "Econometric Aspects of Convergence: A Survey," Open Economies Review, Springer, vol. 35(4), pages 701-721, September.
    5. Kohsaka, Akira, 2025. "The end of miracle? China's economic growth pattern," International Economics, Elsevier, vol. 183(C).

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    Keywords

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    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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