Decomposing China's Economic Growth From 2012 to 2022 - A Dynamic CGE Analysis

James Giesecke and Xiujian Peng

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: China has experienced remarkable economic growth since its reform and opening-up in the early 1980s. Although growth has moderated as the economy has matured and undergone structural adjustment, China has maintained relatively strong performance, averaging 5-6% annually between 2010 and 2024. Using an economy-wide dynamic computable general equilibrium model of the Chinese economy, CHINAGEM, and a historical/decomposition approach, this study identifies the key drivers of growth over 2012-2017 and 2017-2022. Productivity growth emerges as the dominant driver in both periods. In contrast, declining employment exerts a negative effect, which intensifies in 2017-2022 due to a sharper contraction in labour supply associated with population ageing. External demand and a rising preference for domestically produced goods also contributed positively to growth. Looking ahead, the projected decline in China's working-age population will place sustained downward pressure on labour supply. These findings underscore the central role of productivity growth in offsetting demographic headwinds. Policies that foster technological progress and innovation, alongside investment in human capital and skills, will be critical to sustaining long-term economic growth.

Keywords: Economic Growth; Decomposition; Historical simulation; CGE model; China (search for similar items in EconPapers)
JEL-codes: C68 O47 O53 (search for similar items in EconPapers)
Date: 2025-03
New Economics Papers: this item is included in nep-cmp
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