china’s growth: the making of an economic superpower
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China’s Growth: The Making of an Economic Superpower. Linda Yueh www.lindayueh.com Twitter @lindayueh. China’s Growth: The Making of an Economic Superpower. What has driven growth since 1979? Re-balancing challenges Goal for next 30 years: Overcoming the “middle income country trap”. - PowerPoint PPT PresentationTRANSCRIPT
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China’s Growth:The Making of an
Economic Superpower
Linda Yuehwww.lindayueh.comTwitter @lindayueh
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China’s Growth:The Making of an Economic Superpower
• What has driven growth since 1979?
• Re-balancing challenges
Goal for next 30 years: Overcoming the “middle income country trap”
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China vs G7
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Average income near “trap” level
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Middle income country trap
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Real Average GDP Growth and Institutional Reform
0
2
4
6
8
10
12
14
16
CRS
HRS
%
"Open door" policy
WTO membershipBRS
Stock markets established
Company Law passed
Private property recognised
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China’s impressive growth
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Growth drivers
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Contributions to growth Factor accumulation: 60-70%• Capital accumulation: 50%• Labour accumulation: 10-20%
Total Factor Productivity (TFP): 30-40%• Human capital: 11-15%• Factor re-allocation: 8-15%• Innovation: 16-17% minus “imitation” = 6-13%
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Re-balancing challenges
(1) Increase reliance on own market, less on exports
(2) Raise consumption, reduce inefficient savings
(3) Grow private sector, reduce distortions from state-owned sector
(4) Increase innovation, as imitation limits reached
(5) Continued opening, include firms “going global”12
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(1) Re-balancing towards services
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Shar
e o
f G
DP
(%
)
Primary Secondary Tertiary
Services
Industry
Agriculture
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(2) Raise consumption as % GDP
30%
35%
40%
45%
50%
55%
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(2) Address growth in savings
0%
10%
20%
30%
40%
50%
60%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Government Households Firms
Sha
re o
f G
DP
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(3) Reduce state sector?
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State-owned enterprises
Private firms
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(3) State-owned sector still important for jobs
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(3) Notable productivity differences
0
20
40
60
80
100
120
140
160
180
200
2000 2001 2002 2003 2004 2005
1000 R
MB
SOEs Privatised SOEs Private firms Greater China JV Other JVs JVs with TT Greater China WOFE Other WOFE
JVs with TT
Greater China WOFE
Other WOFEOther JVs
Greater China JVs
SOEs
Privatised SOEs
Private firms
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(3) Also in return on assets
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0.000
0.200
0.400
0.600
0.800
1.000
1.200
2000 2001 2002 2003 2004 2005
SOEs Collectives Private sole proprietorships Private partnerships Private LLCs and incorporated firms
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(4) Signs of innovationPatents & real GDP per capita (in 1990 RMB)
138
22588
45064
100156105345
114251
132399
182226190238
214003
853
1634
2647
3281
3534
3790
4101
4490
55135653
0
50000
100000
150000
200000
250000
1985 1990 1995 1999 2000 2001 2002 2003 2004 2005
Nu
mb
er
of
pat
ents
0
1000
2000
3000
4000
5000
6000
RM
B
Real GDP per capita
Patents granted
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(5) China “going global”
Source: IMF.
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Salter-Swan Model linking interest rate & exchange rate reforms
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The next decades of reform
• 2020: Re-structuring the economy
• 2030: Productivity & innovation as growth drivers
• 2040: Stable & strong institutional foundations
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China’s Growth:The Making of an
Economic Superpower
Linda Yuehwww.lindayueh.comTwitter @lindayueh