Revising down the rise of China

[3] See, for instance, Yuen Ang (2021) on how China’s “common prosperity” doctrine reflects an uncertain attempt to tame the excesses of Chinese capitalism in “Can Xi End China’s Gilded Age?”, Project Syndicate, 21 September 2021, https: / /; and Rhodium Group (2021) on recent anti-market policy trends in Daniel H. Rosen, Thilo Hanemann, Rachel Lietzow, Ryan Featherston, Josh Lipsky, and Niels Graham, “China Pathfinder: Annual Scorecard”, Rhodium Group, 5 October 2021,

[5] Both the PWT 10.0 economic database and the widely-used Total Economy Database ™ of the Conference Board adjust China’s GDP and growth figures downwards arguing that official statistics overstate these. Amongst recent studies, Chen et al (Wei Chen and Xilu Chen, “A Forensic Examination of China’s National Accounts”, Brookings Institution, Spring 2019, ChenEtAl_web.pdf) finds China’s GDP to be overestimated in official statistics. Other recent studies, however, suggest that official GDP numbers are not substantially overestimated (Carsten A. Holz, “The Quality of China’s Statistics”, China Economic Review(30), 2014, 309-338, or could be underestimated (Hunter Clark, Maxim Pinkovskiy, and Xavier Sala-i-Martin, China’s GDP Growth May be Understated, NBER, (Massachusetts: National Bureau of Economic Research, April 2017), Finally, Fernald et al (John Fernald, Eric Hsu, and Mark M. Spiegel, “Is China Fudging its Figures? Evidence from Trading Partner Data”, Federal Reserve Bank of San Francisco, September 2015, https: //www.frbsf. org / economic-research / files / wp2015-12.pdf) suggest China’s GDP statistics have been improving in accuracy over time.

[10] Nicholas Lardy of the Peterson Institute says that “China’s potential growth for a considerable period into the future is more rapid than the 6 to 7 percent rate observed in recent years.” See Nicholas R Lardy, The State Strikes Back: The End of Economic Reform in ChinaPeterson Institute for International Economics, (New York: Columbia University Press, 2019),

[11] Lant Pritchett and Lawrence H. Summers, Asiaphoria Meets Regression to the MeanNBER, (Massachusetts: National Bureau of Economic Research, October 2014),

[12] See Appendix A1 for the full list of existing studies and how these compare to the baseline projections of this study.

[18] See appendix for detail.

[19] Based on estimates by Richard Herd, “Estimating Capital Formation and Capital Stock by Economic Sector in China: The Implications for Productivity Growth”, Policy Research Working Paper, No. 9317, World Bank, Washington, DC, 2020,

[20] Wang Jing, Chen Bo, Yu Ning, Zhu Liangtao, Wang Juanjuan, Zhou Wenmin, and Denise Jia, “How Evergrande Could Turn Into ‘China’s Lehman Brothers'”, Caixin Global, 20 September 2021, https: //www.caixinglobal. com / 2021-09-20 / cover-story-how-evergrande-could-turn-into-chinas-lehman-brothers-101775596.html.

[21] These include Dalian Wanda, HNA, Anbang Insurance, Baoshang Bank, and Huarong.

[23] See appendix for detail.

[32] Holding constant the other key assumptions we make for our baseline projection.

[33] The Economist summarises China’s current policy program as consisting of industrial modernization (eg targeting a constant share of manufacturing in GDP, encouraging the uptake of industrial robots), better urbanization (eg hukou reform, smart cities, and creating urban mega clusters such as the Greater Bay Area), and various reforms aimed at lifting efficiency (eg in education, financial regulation, bankruptcy law, etc.). See “China’s Future Economic Potential Hinges on Its Productivity”, The Economist14 August 2021,

[34] See Nicholas Lardy, Markets Over Mao: The Rise of Private Business in China, Peterson Institute for International Economics, (Washington: Columbia University Press, September 2014),; as well as the interesting article by Adam Tooze on a 1983 World Bank report foreshadowing China’s growth potential, “China in 1983, a Miracle Waiting to Happen?”, Chartbook, 25 July 2021, / adam-toozes-chartbook-28-china-in.

[35] See, for instance, Loren Brandt, John Litwack, Elitza Mileva, Luhang Wang, Yifan Zhang, and Luan Zhao, “China’s Productivity Slowdown and Future Growth Potential”, Policy Research Working Paper No. 9298, World Bank, Washington, DC, 2020, Herd (2020) also shows that productivity growth has been higher in the business sector, but nonetheless also slowed during the past decade.

[39] Daniel Rosen, “China’s Economic Reckoning”, Foreign Affairs, July / August 2021,; Lardy, The State Strikes Back, 2019,; David Orsmond, China’s Economic Choices, Lowy Institute, Analysis, (Sydney: Lowy Institute, 17 December 2019),; “China’s Economic Growth and Rebalancing and the Implications for the Global and Euro Area Economies”, European Central Bank, 2017,

[41] Roland Rajah, East Asia’s Decoupling, Lowy Institute, Research Note, (Sydney: Lowy Institute, 23 January 2019),; Hung Tran, “Decoupling / Reshoring versus Dual Circulation”, Atlantic Council Issue Brief, April 2021,

[42] Takatoshi Sasaki, Tomoya Sakata, Yui Mukoyama, and Koichi Yoshino, “China’s Long-Term Growth Potential: Can Productivity Convergence be Sustained?”, Bank of Japan, June 30, 2021, /research/wps_rev/wps_2021/data/wp21e07.pdf; and Orsmond, China’s Economic Choices2019,

[46] W Baumol and W Bowen, “On the Performing Arts: The Anatomy of Their Economic Problems”, The American Economic Review, (55) 1/2, 1 March 1965, 495–502,; and William Nordhaus, Baumol’s Diseases: A Macroeconomic PerspectiveNBER, (Massachusetts: National Bureau of Economic Research, 2006),

[48] This is the approach taken, for instance, in Jeannine Bailliu, Mark Kruger, Argyn Toktamyssov, and Wheaton Welbourn, “How Fast Can China Grow? The Middle Kingdom’s Prospects to 2030 ”, Bank of Canada, April 2016,; and Innovative China: New Drivers of GrowthWorld Bank, Development Research Center of the State Council, The People’s Republic of China, (Washington, DC: World Bank, 2019),

[49] For instance, Yu Huang, Marco Pagano, and Ugo Panizza, “Local Crowding-Out in China”, The Journal of Finance(75) 6, 2855–2898, 2020,, document evidence of higher local public debt levels crowding out local private investment.

[50] Following the standard investment accelerator effect linking the rate of investment to speed of economic growth.

[51] See for instance, Takatoshi Sasaki et al, “China’s Long-Term Growth Potential”, 2021,; and Longmei Zhang, Ray Brooks, Ding Ding, Haiyan Ding, Hui He, Jing Lu, and Rui Mano, “China’s High Savings: Drivers, Prospects, and Policies”, International Monetary Fund, 11 December 2018, https: // www.

[52] Note that faster productivity growth would also increase the growth contribution of investment, reducing the total required increase in productivity growth needed to reach a higher overall economic growth rate.

[55] This follows the well-documented Penn effect whereby price levels tend to be higher in richer countries. See, for example, Yin-Wong Cheung, Menzie Chinn, and Xin Nong, Estimating Currency Misalignment Using the Penn Effect: It’s Not as Simple as It LooksNBER, (Massachusetts: National Bureau of Economic Research, August 2016),

[56] The West here includes the United States, the 27 members of the European Union, Japan, the United Kingdom, Canada, and Australia.

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