China’s Growth:The Making of an

Economic Superpower

Linda Yuehwww.lindayueh.comTwitter @lindayueh

Tuesday, 25 June 13

China’s Growth:The Making of an Economic

• What has driven growth since 1979?

• Re-balancing challenges

Goal for next 30 years: Overcoming the “middle income country trap”

2

Tuesday, 25 June 13

China vs G7

3

Tuesday, 25 June 13

Average income near “trap” level

0

3,750

7,500

11,250

15,000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

201020

1120

1220

1320

1420

1520

1620

17

US$

at P

PP

Middle

Tuesday, 25 June 13

5

Tuesday, 25 June 13

China’s impressive growth

6

Tuesday, 25 June 13

Growth drivers

7

Tuesday, 25 June 13

8

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9

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10

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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%11

Tuesday, 25 June 13

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

12

Tuesday, 25 June 13

13

(1) Re-balancing towards services

0%

25%

50%

75%

100%

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Shar

e of

GD

P (%

)

Primary Secondary Tertiary

Services

Industry

Agriculture

Tuesday, 25 June 13

14

(2) Raise consumption as % GDP

30%

38%

45%

53%

60%

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

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15

(2) Address growth in

0%

15%

30%

45%

60%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Government Households Firms

Sha

re o

f GD

P

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(3) Reduce state sector?

16

State-owned enterprises

Private firms

Tuesday, 25 June 13

(3) State-owned sector still important for jobs

17

Tuesday, 25 June 13

(3) Notable productivity differences

18

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(3) Also in return on assets

19

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(4) Signs of innovation

20

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21

(5) China “going global”

Source: IMF.

Tuesday, 25 June 13

Salter-Swan Model linking interest rate & exchange rate reforms

Tuesday, 25 June 13

23

The next decades of reform

• 2020: Re-structuring the economy

• 2030: Productivity & innovation as growth drivers

• 2040: Stable & strong institutional foundations

Tuesday, 25 June 13

China’s Growth:The Making of an

Economic Superpower

Linda Yuehwww.lindayueh.comTwitter @lindayueh

Tuesday, 25 June 13