What Does the Lewis Turning Point Mean for China? A Computable General Equilibrium Analysis

Yiping Huang and Jiang Tingsong

Macroeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: We apply a computable general equilibrium framework to assess likely impacts of the Lewis turning point on China and the rest of the world. Modeling results suggest that China will probably transition from an abnormal economy to a normal economy with somewhat lower growth but higher inflation, which requires significant revision to the macroeconomic policy framework. China would lose competitiveness in laborintensive activities, its current account surplus should fall but overinvestment risk could rise. These changes in China should help improve other counties current accounts and boost lowcost countries production. The Lewis turning point, however, does not provide automatic solutions to some of the key challenges, such as service sector development and innovation capability. China will need to make serious policy efforts to avoid the socalled middle income trap.

Keywords: Lewis turning point; labor shortage; general equilibrium analysis; normal economy; middle†income trap (search for similar items in EconPapers)
JEL-codes: C68 E30 (search for similar items in EconPapers)
Date: 2010-01
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Citations: View citations in EconPapers (6)

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Journal Article: What does the Lewis turning point mean for China? A computable general equilibrium analysis (2010)
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