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Decomposing China's Economic Growth From 2012 to 2022 - A Dynamic CGE Analysis

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  • James Giesecke
  • Xiujian Peng

Abstract

China has experienced remarkable economic growth since its reform and opening-up in the early 1980s. Although growth has moderated as the economy has matured and undergone structural adjustment, China has maintained relatively strong performance, averaging 5-6% annually between 2010 and 2024. Using an economy-wide dynamic computable general equilibrium model of the Chinese economy, CHINAGEM, and a historical/decomposition approach, this study identifies the key drivers of growth over 2012-2017 and 2017-2022. Productivity growth emerges as the dominant driver in both periods. In contrast, declining employment exerts a negative effect, which intensifies in 2017-2022 due to a sharper contraction in labour supply associated with population ageing. External demand and a rising preference for domestically produced goods also contributed positively to growth. Looking ahead, the projected decline in China's working-age population will place sustained downward pressure on labour supply. These findings underscore the central role of productivity growth in offsetting demographic headwinds. Policies that foster technological progress and innovation, alongside investment in human capital and skills, will be critical to sustaining long-term economic growth.

Suggested Citation

  • James Giesecke & Xiujian Peng, 2026. "Decomposing China's Economic Growth From 2012 to 2022 - A Dynamic CGE Analysis," Centre of Policy Studies/IMPACT Centre Working Papers g-366, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-366
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    References listed on IDEAS

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    1. W. Jill Harrison & J. Mark Horridge & K.R. Pearson, 2000. "Decomposing Simulation Results with Respect to Exogenous Shocks," Computational Economics, Springer;Society for Computational Economics, vol. 15(3), pages 227-249, June.
    2. John Whalley & Xiliang Zhao, 2010. "The Contribution of Human Capital to China's Economic Growth," NBER Working Papers 16592, National Bureau of Economic Research, Inc.
    3. James Giesecke, 2002. "Explaining regional economic performance: An historical application of a dynamic multi-regional CGE model," Review of Economic Design, Springer;Society for Economic Design, vol. 81(2), pages 247-278, April.
    4. Peter B. Dixon & Maureen T. Rimmer, 2004. "The US Economy from 1992 to 1998: Results from a Detailed CGE Model," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages 13-23, September.
    5. Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
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    Keywords

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    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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