Abstract
I shall begin this discussion on the productivity of the Chinese economy with what is called the “new normal.” Almost overnight, everyone is talking about the new normal, and some economists have even jokingly suggested that it be taken as an economics course in universities.
This chapter is based on a report given at the international symposium, “China’s New Normal: Growth, Structure, and Momentum,” organized by Chinese Academy of Social Sciences. In 2014, the English version of this report was presented at the Third World KLEMS Conference and the Asia-Pacific Productivity Conference (APPC), as well as symposiums hosted by Peking University, Nankai University, the CASS Institute of World Economy and Politics, the China Comparative Economics Association, the Organization for Economic Cooperation and Development (OECD), the Centre d’Etudes Prospectives et d’Informations Internationales (CEPII), and the Asian Development Bank (ADB). The author truly appreciates the constructive criticism and comments received at these meetings. Part of the report was published in Comparative Studies (Volume 69, 2013) as “Measuring and Interpreting Total Factor Productivity in Chinese Industry.” The current version has omitted the mathematical derivation of the empirical studies, and for data cited herein, it only provides the source of relevant publications. The author takes full responsibility for the content.
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- 1.
On the motivations of local government officials for growth, see Li and Zhou 2005.
- 2.
A negative externality is a production cost suffered by a third party, which can be an individual, the public, or even society as a whole (see Fig. 1).
- 3.
Under this analytical framework of growth measurement, we are unable to further decompose efficiency and technical changes, and therefore our estimates of TFP changes are the net effect of efficiency and technical changes.
- 4.
This classification is based on China National Bureau of Statistics’ (NBS) industrial classification. The two classifications are mutually convertible, but do not completely overlap with each other.
- 5.
For a better understanding of the “cross-subsidization hypothesis,” I also estimated the unit labor cost (ULC) and the marginal product of capital (MPK) of Chinese industries and sectors under varying degrees of government intervention in my paper in Volume 69 of Comparative Studies, which focused on the total factor productivity of Chinese industry. Although the MPK estimation was largely based on hypotheses, it is still a useful reference.
- 6.
Note that “gross output value” differs from “gross output” in that the former includes intermediate inputs, while the latter equals “value added.”
- 7.
Many scholars have cast doubts on China’s economic statistics in their research literature, including myself (Maddison and Wu 2008). See Wu (2014b) for a summary of this issue. Nonetheless, the basic principle of the CIP Database is to accept the official output estimates, primarily because there is simply no substitute for them at the sector level.
- 8.
Basically, the CIP Database was established in accordance with the principles of the KLEMS approach. KLEMS stands for K(C)apital, Labor, Energy, Materials, and Service, the basic factors and intermediate outputs and inputs in the production function for gross output (O’Mahony and Timmer 2009). For the CIP output statistics, including input-output tables, national accounting, and producers’ prices, please refer to Ito and Wu; for details of the establishment of the CIP employment and payoff matrices and the CIP labor hour estimates, please refer to Wu and Yue (2012; Wu, et al. 2015); for the establishment of the CIP capital stock and the CIP capital input estimates, please refer to Wu (2015).
- 9.
It must be pointed out that our grouping utilizing the currently-available industry classification may not be very accurate. In some cases, it is very hard to define the nature of a sector, inevitably resulting in an obscure boundary between neighboring groups. For instance, both “wood and furniture” and “paper and printing” include “materials (pulp and board)” and “products and semi-products (furniture and paper products).”
- 10.
- 11.
See (Jorgenson 1990) for a summary of this method and a comparison with other methods.
- 12.
For discussions on the demographic dividend and the Lewis turning point, see (Cai 2010).
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Wu, H.X. (2020). Productivity Under the New Normal: Latest Estimates and Interpretations of China’s Total Factor Productivity. In: Cai, F. (eds) China’s Economic New Normal. Research Series on the Chinese Dream and China’s Development Path. Springer, Singapore. https://doi.org/10.1007/978-981-15-3227-6_10
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