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Productivity Growth of the Non-Tradable Sectors in China

Author

Listed:
  • Dong He

    (Hong Kong Monetary Authority and Hong Kong Institute for Monetary Research)

  • Wenlang Zhang

    (Hong Kong Monetary Authority)

  • Gaofeng Han

    (Hong Kong Monetary Authority)

  • Tommy Wu

    (Hong Kong Monetary Authority)

Abstract

Little is known about the total factor productivity of the non-tradable sectors in China. In this paper we estimate productivity growth of the non-tradable sectors by studying the relative price movements of the non-tradable sectors vis-a-vis the tradable sectors, i.e. changes in the internal real exchange rate. We find that prices of the non-tradable sectors have risen significantly faster than those of the tradable sectors, and China's internal real exchange rate has appreciated at a faster pace than the renminbi real effective exchange rate. We also find the non-tradable sectors have seen much lower productivity growth than the tradable sectors, and such productivity differentials are large when compared to other economies. We argue that if productivity growth in the non-tradable sectors remains slow, China will likely see more difficulty in rebalancing its growth pattern and higher inflationary pressures in the medium term. As such, it is important for the authorities to take policy actions to raise productivity growth in the non-tradable sectors.

Suggested Citation

  • Dong He & Wenlang Zhang & Gaofeng Han & Tommy Wu, 2012. "Productivity Growth of the Non-Tradable Sectors in China," Working Papers 082012, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:082012
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    References listed on IDEAS

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    Cited by:

    1. Tang, Heiwai & Wang, Fei & Wang, Zhi, 2014. "The domestic segment of global supply chains in China under state capitalism," Policy Research Working Paper Series 6960, The World Bank.
    2. repec:unt:jnapdj:v:24:y:2017:i:1:p:1-21 is not listed on IDEAS
    3. Philippe Bacchetta & Kenza Benhima & Yannick Kalantzis, 2014. "Optimal Exchange Rate Policy in a Growing Semi-Open Economy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(1), pages 48-76, April.
    4. Kemp, Deanna & Worden, Sandy & Owen, John R., 2016. "Differentiated social risk: Rebound dynamics and sustainability performance in mining," Resources Policy, Elsevier, vol. 50(C), pages 19-26.
    5. Xiaodong Zhu, 2012. "Understanding China's Growth: Past, Present, and Future," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 103-124, Fall.

    More about this item

    Keywords

    Tradable and Non-Tradable Sectors; Internal Real Exchange Rate; Total Factor Productivity;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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