Publication: China's Productivity Slowdown and Future Growth Potential
Date
2020-06
ISSN
Published
2020-06
Author(s)
Brandt, Loren
Litwack, John
Mileva, Elitza
Wang, Luhang
Zhang, Yifan
Zhao, Luan
Abstract
China’s economy grew by an impressive 10
percent per year over four decades. Productivity
improvements within sectors and gains from resource
reallocation between sectors and ownership groups drove that
expansion. However, productivity growth has declined
markedly in recent years. This paper extends previous macro
and firm-level studies to show that domestic factors and
policies contributed to the slowdown. The analysis finds
that limited market entry and exit and lack of resource
allocation to more productive firms were associated with
slower manufacturing total factor productivity growth.
Earlier reforms led to state-owned enterprises catching up
to private sector productivity levels in manufacturing, but
convergence stalled after 2007. Furthermore, the allocation
of a larger share of credit and investment to infrastructure
and housing led to lower returns to capital, a rapid buildup
in debt, and higher risks to growth. China’s growth
potential remains high, but its long-term growth prospects
depend on reversing the recent decline in total factor
productivity growth.
Citation
“Brandt, Loren; Litwack, John; Mileva, Elitza; Wang, Luhang; Zhang, Yifan; Zhao, Luan. 2020. China's Productivity Slowdown and Future Growth Potential; China's Productivity Slowdown and Future Growth Potential. Policy Research Working Paper;No. 9298. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/33993 License: CC BY 3.0 IGO.”
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