The end of miracle? China's economic growth pattern

Abstract

Despite its recent period of “unprecedentedly” high and sustained economic growth, China has long been expected to face a sudden slowdown sooner or later. This paper examines China's growth pattern over the past three decades as a process of income catching-up similar to that experienced by other East Asian economies. We analyze this within a simple neoclassical framework of economic growth, using an internationally comparable macroeconomic database. We find that China's growth pattern is not unprecedented but rather closely parallels that of its East Asian forerunners. Furthermore, we find that, while China's catching-up has primarily been driven by capital deepening rather than TFP growth, it could be sustained for decades due to the slow diminishing returns to capital.