Regaining China's Resource Reallocative Efficiency to Boost Growth

The structural changes that the Chinese economy has been experiencing since its working-age population began to decline pose challenges for its further growth.First,as it loses its comparative advantage in labor-intensive activities,the share of manufacturing in its GDP has shrunk.Second,unproductive enterprises that are reluctant to exit the market tend to seek policy protection,which leads to the immobility of resource allocation.Third,the reallocation of the labor force from the highly productive manufacturing sector to the low-productivity service sector leads to the degradation of resource allocation.The inadequate exploitation of the potential of resource reallocation implies that the decline in manufacturing is premature.It is therefore important to combine market competition policy,industrial policy,and social protection policy to stabilize the development of manufacturing.

Sustainability of China＇s Growth Model A Productivity Perspective

In the present paper, the debate on China＇s growth sustainability is first revisited by highlighting the importance of total factor productivity （TFP）. China ＂s TFP performance is then assessed by applying the Jorgensonian aggregate production possibility frontier framework to the latest version of the China lndustry Productivity （CIP） database. We find that of China＇s 8.9-percent annual GDP growth over the period 1980-2012, 7. 0 percentage points （ppts） could be attributed to the growth of labor productivity and 1.9 ppts to the increase in hours worked. Nevertheless, the labor productivity growth is found to be heavily dependent on capital deepening （5.7） rather than TFP growth （0.8）. Notably, the TFP growth turned negative over 2007-2012, which brings into question the sustainability of China＇s growth. Besides, industries that are less prone to state intervention show faster TFP growth than those controlled by the state. Incorporating the Domar aggregation scheme into our model, we further reveal that two-thirds of the TFP growth originates from within industries and the remainder is attributed to a net factor reallocation effect in which labor plays a positive role, whereas capital appears to behave irrationally. Finally, using a revised Maddison-Wu approach to address the potential flaws in official statistics, we arrive at an annual growth rate of 7.2 percent, or 1.7-ppts slower than the 8.9percent obtained based on the CIP data reconstructed using the official national accounts.

Estimation of China’s Industry-Level TFP and Analysis of Growth Drivers

By examining how China’s total factor productivity(TFP)evolved over time on the industry level,we can help determine where China should head for in a new era featured by a shift from old to new growth drivers and promote high-quality economic development.Based on consistent and comparable data of input and output,this paper measures total factor productivity on the industry level through growth accounting method and then estimate the overall productivity of the entire economy with aggregate production possibility frontier(APPF)and cross-industry direct aggregation.On this basis,China’s growth drivers are analyzed.Results show that from 1985 to 2015,capital input was the top contributor to China’s economic growth and TFP also played an important role.Up to 70 percent of the aggregate TFP growth could be attributed to increases in industrial TFP,while the remaining 30 percent came from improved cross-industrial resource allocation.