China’s Path to Sustainable and Balanced Growth

Dirk Muir, Natalija Novta and Anne Oeking

No 2024/238, IMF Working Papers from International Monetary Fund

Abstract: After decades of high growth, the Chinese economy is facing headwinds from slowing productivity growth and a declining workforce that are projected to lower potential growth substantially in the longer term. We project China’s potential growth over the medium to long term, showing that potential growth could slow to around 3.8 percent on average between 2025-30 and to around 2.8 percent on average over 2031-40 in the absence of major reforms. We present a reform scenario with structural reforms to lift productivity growth and rebalancing China’s growth towards more consumption, that would help China transition to “high-quality”—balanced, inclusive, and green—growth. We use production function and general equilibrium modelling approaches to show that potential growth could remain at around 4.3 percent between 2025-40 under the reform scenario.

Keywords: Potential growth; investment-led growth; rebalancing; demographic trends; structural reforms; reform scenario; General equilibrium modeling approach; reforming China's economy; tertiary sector; SOE productivity gap; Total factor productivity; Productivity; Consumption; Global value chains; Global; Southeast Asia (search for similar items in EconPapers)
Pages: 32
Date: 2024-11-15
New Economics Papers: this item is included in nep-cna, nep-fdg and nep-gro
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