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China's economic growth and rebalancing

  • Dorrucci, Ettore
  • Pula, Gabor
  • Santabárbara, Daniel

In this paper we provide an overview of the growth model in China and its prospects, taking a medium-run to long-run perspective. Our main conclusions are as follows. First, the still prevailing producer-biased model of managed capitalism in China tends to engender, as an inherent byproduct, serious imbalances which cannot be unwound without a fundamental overhaul of the model itself. Second, given the lack of a critical mass of economic reforms thus far, imbalances may (re-)escalate once global and domestic economic conditions normalise. Third, the fundamental factors underpinning growth in China are likely to remain supportive, at least over the medium run. Although this could help mitigate the economic costs of imbalances for some time to come, it could also reduce the incentives for policy-makers to enact much needed reforms. Fourth, delayed policy action and the persistence of the model of growth cum imbalances would increase the risk of China getting caught in the middle-income trap in the long run. Greater political will to redirect China’s growth model towards a more sustainable path is therefore needed. JEL Classification: C22, C51, C53, C59

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Paper provided by European Central Bank in its series Occasional Paper Series with number 142.

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Date of creation: Feb 2013
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Handle: RePEc:ecb:ecbops:20130142
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  1. Straub, Roland & Thimann, Christian, 2010. "The external and domestic side of macroeconomic adjustment in China," Journal of Asian Economics, Elsevier, vol. 21(5), pages 425-444, October.
  2. Fang Cai & Meiyan Wang, 2008. "A Counterfactual Analysis on Unlimited Surplus Labor in Rural China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(1), pages 51-65.
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  4. Dorrucci, Ettore & Pula, Gabor & Santabárbara, Daniel, 2013. "China's economic growth and rebalancing," Occasional Paper Series 142, European Central Bank.
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  8. Kumiko Okazaki & Masazumi Hattori & Wataru Takahashi, 2011. "The Challenges Confronting the Banking System Reform in China: An Analysis in Light of Japan's Experience of Financial Liberalization," IMES Discussion Paper Series 11-E-06, Institute for Monetary and Economic Studies, Bank of Japan.
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  11. Zhang, Xiaobo & Yang, Jin & Wang, Shenglin, 2011. "China has reached the Lewis turning point," China Economic Review, Elsevier, vol. 22(4), pages 542-554.
  12. David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China," NBER Working Papers 13103, National Bureau of Economic Research, Inc.
  13. Tomoyuki Fukumoto & Ichiro Muto, 2011. "Rebalancing China's Economic Growth: Some Insights from Japan's Experience," Bank of Japan Working Paper Series 11-E-5, Bank of Japan.
  14. Pula, Gabor & Santabárbara, Daniel, 2011. "Is China climbing up the quality ladder? Estimating cross country differences in product quality using Eurostat's COMEXT trade database," Working Paper Series 1310, European Central Bank.
  15. Sarai Criado & Adrian van Rixtel, 2008. "Structured finance and the financial turmoil of 2007-2008: and introductory overview," Banco de Espa�a Occasional Papers 0808, Banco de Espa�a.
  16. Park , Donghyun & Park, Jungsoo, 2010. "Drivers of Developing Asia's Growth: Past and Future," ADB Economics Working Paper Series 235, Asian Development Bank.
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