China Center Special Briefing Paper: Re-Estimating Chinese Productivity

In Part 1 of this series, Dr. Harry X. Wu presented evidence showing that the overall pace of GDP growth in China has been systematically overstated during the reform era (i.e., from 1978 forward). In this follow-up report, he builds on those findings to more deeply examine the quality of Chinese growth and the drivers behind it over time.

Specifically, Wu looks at the economy’s productivity performance since 1952 and shows that the country’s capital-intensive development has come at the expense of efficient resource allocation, even during times of great institutional change that were previously thought to be productivity-enhancing. What’s more, he argues that, in recent years, productivity growth has even turned negative, suggesting that inefficient capital allocation has become so widespread as to begin depressing overall economic growth. The findings are illuminating for the depth and persistence of economic inefficiency that they indicate – and for their implications on the needed breadth and urgency of structural economic reform.