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China’s Productivity Convergence and Growth Potential—A Stocktaking and Sectoral Approach
Author:
Min Zhunull

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,
Ms. Longmei Zhang
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, and
Daoju Pengnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 263
Language:
English
Publication Date:
27 Nov 2019
DOI:
https://doi.org/10.5089/9781513515359.001
ISBN:
9781513515359
ISSN:
1018-5941
Pages:
46
Keywords:
WP; market services; productivity convergence; high-productivity industrial sector; potential GDP; labor productivity; growth outlook; real value; industry structure; productivity slowdown; Productivity; Services sector; Labor productivity; Industrial sector; Industrial productivity; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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China’s growth potential has become a hotly debated topic as the economy has reached an income level susceptible to the “middle-income trap” and financial vulnerabilities are mounting after years of rapid credit expansion. However, the existing literature has largely focused on macro level aggregates, which are ill suited to understanding China’s significant structural transformation and its impact on economic growth. To fill the gap, this paper takes a deep dive into China’s convergence progress in 38 industrial sectors and 11 services sectors, examines past sectoral transitions, and predicts future shifts. We find that China’s productivity convergence remains at an early stage, with the industrial sector more advanced than services. Large variations exist among subsectors, with high-tech industrial sectors, in particular the ICT sector, lagging low-tech sectors. Going forward, ample room remains for further convergence, but the shrinking distance to the frontier, the structural shift from industry to services, and demographic changes will put sustained downward pressure on growth, which could slow to 5 percent by 2025 and 4 percent by 2030. Digitalization, SOE reform, and services sector opening up could be three major forces boosting future growth, while the risks of a financial crisis and a reversal in global integration in trade and technology could slow the pace of convergence.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2019: Issue 263