Yao Yang Chinese Growth Model Nyc Forum
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China’s Export-led China’s Export-led Growth Model: Time to Growth Model: Time to Change? Change? Yang Yao NSD & CCER Peking University 22/6/26 1 China’s Economy in 2010: Forecast and Views, NYSE, Jan. 7, 2010
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Transcript of Yao Yang Chinese Growth Model Nyc Forum
China’s Export-led Growth China’s Export-led Growth Model: Time to Change?Model: Time to Change?
Yang YaoNSD & CCERPeking University
23/4/10
1
China’s Economy in 2010: Forecast and Views, NYSE, Jan. 7, 2010
What is wrong with the What is wrong with the Chinese growth model?Chinese growth model?
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Source: China Statistical Yearbook, various years.
The Conventional wisdomThe Conventional wisdomSavings explanation:
◦Chinese people save a lot, so◦Domestic consumption is low and China has
to export a lot.Exchange rate explanation:
◦China undervalues its currency so its products are artificially competitive in the world market.
◦But between 2005 and 2008, China’s export volumes and CA surplus both increased dramatically despite 20% revaluation of the RMB.
23/4/10China’s Economy in 2010: Forecast and Views, NYSE, Jan. 7, 2010 3
Long-term factorsLong-term factorsIndustrial capacities Human capitalAccession to WTODemographic and structural
transformation◦A large labor force in the countryside:
40% of the national total◦Demographic dividends: High
working-to-dependent ratio
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Ratios of working population in the Ratios of working population in the worldworld
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Source: Bloom, David etc. "Demographic change, social security systems, and savings," Journal of Monetary Economics, 2007, 54(1), pp. 92-114.
Capital deepeningCapital deepening
23/4/10China’s Economy in 2010: Forecast and Views, NYSE, Jan. 7, 2010 6
Share of labor income in GDP
decreases
Share of labor income in GDP
decreases
Expansion of tradeExpansion of trade
High returns to capitalHigh returns to capital
More investmentMore investment
Share of capital gains in GDP
increases
Share of capital gains in GDP
increases
Low wage ratesLow wage rates+
+
High growth of labor productivity in High growth of labor productivity in manufacturingmanufacturing
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Source: Lu and Liu, “The Growth of labor Productivity in Two Sectors and InternationalComparison.: China Economic Quarterly, 2007, Vol. 6, No. 2: 357-380.
Accumulative growth
Annual growth
Ann
ual growth
(%
)
Accum
ulative g
rowth (%
)
1991 － 2006: • Labor prod. in manufacturing
increased by a rate of 13.6％1978-2006:
◦Manufacturing wage increased by a rate of 6.55%
Consequences◦Profit rates increased fast◦Share of labor income declined
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Profit rates have increased fast since 1998
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0
2
4
6
8
10
12
14
16
18
2019
93
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
/利润总额 权益 /利润总额 资产/总回报 权益 /总回报 资产/净利润 权益 /净利润 资产/净利润 固定资产净值
Source: CCER Research Team. “An Estimation of Capital Returns.” CCER Working Paper No. C2007002.
Labor share in national income Labor share in national income decreasesdecreases
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Source: China Statistical Yearbook, various years.
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Source: Chong-En Bai, and Zhenjie Qian. “Who Are Taking Away Residents’ Income?” Social Sciences in China, 2009, No. 5.
Shares of national savings in GDPShares of national savings in GDP
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Source: China Statistical Yearbook, various years.
ConclusionsConclusionsChina’s export-led growth model
is deeply rooted in the international division of labor in which China is well prepared to export labor-intensive manufacturing goods.
Taking trade as given, rebalancing should be more focused on better use of China’s savings.
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