China’s economic growth and convergence

This study explores China’s economic growth performance and prospects in global and
Asian comparative perspectives. Using a general framework of cross-country analysis,
the study identifies and discusses major factors underlying China’s strong growth over
the past decades and those contributing to its recent growth slowdown. The study also
adopts detailed industry-level data to assess structural changes and sectoral growth in
the Chinese economy. China’s low initial per capita income relative to its own long-run
potential provided the opportunity for faster capital accumulation and technology
diffusion. Good policy and institution factors, such as a high investment rate, strong
human capital, high trade openness, and improved institutions, guided the economy to
realize its strong potential for convergence to advanced economy income level. China’s
average potential GDP growth will decline significantly over the coming decade due to
convergence effect and structural problems, unless China substantially upgrades
institutions and policy factors and improves productivity, particularly in its services
sector.
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