IDEAS home Printed from
   My bibliography  Save this paper

China's pattern of growth : moving to sustainability and reducing inequality


  • Kuijs, Louis
  • Wang, Tao


The authors study the sources and pattern of China's impressive economic growth over the past 25 years and show that key issues currently of concern to policymakers-widening inequality, rural poverty, and resource intensity-are to a large extent rooted in China's growth strategy, and resolving them requires a rebalancing of policies. Using both macroeconomic level and sector data and analyses, the authors extend the growth accounting framework to decompose the sources of labor productivity growth. They find that growth of industrial production, led by a massive investment effort that boosted the capital/labor ratio, has been the single most important factor driving GDP and overall labor productivity growth since the early 1990s. The shift of labor from low-productivity agriculture has been limited, and, hence, contributed only marginally to overall labor productivity growth. The productivity gap between agriculture and the rest of the economy has continued to widen, leading to increased rural-urban income inequality. Looking ahead, the authors calibrate two alternative scenarios. They show that continuing with the current growth pattern would further increase already high investment and saving needs to unsustainable levels, lower urban employment growth, and widen the rural-urban income gap. Instead, reducing subsidies to industry and investment, encouraging the development of the services industry, and reducing barriers to labor mobility would result in a more balanced growth with an investment-to-GDP ratio that is consistent with the medium-term saving trend, faster growth in urban employment, and a substantial reduction in the income gap between rural and urban residents.

Suggested Citation

  • Kuijs, Louis & Wang, Tao, 2005. "China's pattern of growth : moving to sustainability and reducing inequality," Policy Research Working Paper Series 3767, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3767

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. John Whalley & Shunming Zhang, 2004. "Inequality Change in China and (Hukou) Labour Mobility Restrictions," NBER Working Papers 10683, National Bureau of Economic Research, Inc.
    2. Zuliu F. Hu & Mohsin S. Khan, 1997. "Why Is China Growing So Fast?," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 103-131, March.
    3. Chow, Gregory C., 1993. "How and why China succeeded in her economic reform," China Economic Review, Elsevier, vol. 4(2), pages 117-128.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Yinhua Mai & Xiujian Peng & Peter Dixon & Maureen Rimmer, 2014. "The economic effects of facilitating the flow of rural workers to urban employment in China," Papers in Regional Science, Wiley Blackwell, vol. 93(3), pages 619-642, August.
    2. John Knight & Wei Wang, 2011. "China’s Macroeconomic Imbalances: Causes and Consequences," The World Economy, Wiley Blackwell, vol. 34(9), pages 1476-1506, September.
    3. Dong He & Wenlang Zhang & Jimmy Shek, 2007. "How Efficient Has Been China'S Investment? Empirical Evidence From National And Provincial Data," Pacific Economic Review, Wiley Blackwell, vol. 12(5), pages 597-617, December.
    4. Dollar, David & Kraay, Aart, 2006. "Neither a borrower nor a lender: Does China's zero net foreign asset position make economic sense?," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 943-971, July.
    5. repec:wsi:ijitdm:v:11:y:2012:i:03:n:s0219622012500150 is not listed on IDEAS
    6. He, Qing & Tai-Leung Chong, Terence & Shi, Kang, 2009. "What accounts for Chinese Business Cycle?," China Economic Review, Elsevier, vol. 20(4), pages 650-661, December.
    7. Wang Dewen, 2010. "Can Social Security Boost Domestic Consumption in the People’s Republic of China?," Working Papers id:2490, eSocialSciences.

    More about this item


    Economic Growth; Labor Markets; Economic Theory&Research; Municipal Financial Management; Achieving Shared Growth;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:3767. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.