The Potential Growth Rate of the Chinese Economy

Abstract

The reason why we have chosen to predict the potential growth rate, rather than the real growth rate, is that a country’s long-term economic growth primarily depends on its growth potential, which is determined by such factors as capital, the labor force, human capital, and total factor productivity. A potential growth rate is the highest possible level of economic growth when such input or supply-side factors are brought into full play. To some degree, it is a probabilistic concept. Therefore, it is possible for the real growth rate to be either higher or lower than the potential growth rate.