Working Paper: NBER ID: w31151
Authors: Eswar S. Prasad
Abstract: China’s remarkable run of persistently high growth in recent decades is all the more stunning in light of the country’s low levels of financial and institutional development, state-dominated economy, and nondemocratic government. Notwithstanding the inefficient and risky growth model, the government has maneuvered the economy around various stresses without any major financial or economic crash. With a shrinking labor force and declining efficiency of investment, raising productivity growth is key to maintaining reasonable GDP growth. Unbalanced reforms, a schizophrenic approach to the role of the market versus the state, and strains in financial and property markets could result in significant volatility but a financial or economic collapse is not in the cards.
Keywords: China; economic growth; productivity; financial stability; structural reforms
JEL Codes: E2; F3; F4; O4; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government intervention (O25) | Economic performance (P17) |
| Inefficient banking system (G21) | Sustainability of growth (O44) |
| Government policy (F68) | Economic resilience (R11) |
| Demographic changes (J11) | Economic outcomes (F69) |
| Declining investment efficiency (G31) | GDP growth (O49) |