Productivity Growth of the Non-Tradable Sectors in China
Gaofeng Han and
Tommy Wu ()
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Wenlang Zhang: Hong Kong Monetary Authority
Gaofeng Han: Hong Kong Monetary Authority
No 82012, Working Papers from Hong Kong Institute for Monetary Research
Little is known about the total factor productivity of the non-tradable sectors in China. In this paper we estimate productivity growth of the non-tradable sectors by studying the relative price movements of the non-tradable sectors vis-a-vis the tradable sectors, i.e. changes in the internal real exchange rate. We find that prices of the non-tradable sectors have risen significantly faster than those of the tradable sectors, and China's internal real exchange rate has appreciated at a faster pace than the renminbi real effective exchange rate. We also find the non-tradable sectors have seen much lower productivity growth than the tradable sectors, and such productivity differentials are large when compared to other economies. We argue that if productivity growth in the non-tradable sectors remains slow, China will likely see more difficulty in rebalancing its growth pattern and higher inflationary pressures in the medium term. As such, it is important for the authorities to take policy actions to raise productivity growth in the non-tradable sectors.
Keywords: Tradable and Non-Tradable Sectors; Internal Real Exchange Rate; Total Factor Productivity (search for similar items in EconPapers)
JEL-codes: E31 F31 F43 (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-dev, nep-mac and nep-tra
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Journal Article: Productivity Growth of the Nontradable Sectors in China (2014)
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