Chinas growth potential and

obstacles
GTT Summit 2017 Yokohama
Yu Yongding
Chinese Academy of Social Sciences
The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the
Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments
they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any
consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
 Chinas growth trajectory
Real GDP Growth
(In percent, year-on-year)

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12
China
10

4
World
2

-2
1993 1996 1999 2002 2005 2008 2011 2014 2017 2019
2
At what level, Chinas growth will be
stabilized?
 What is Chinas potential growth rate
For 30 years since the early 1980s 10%
Since the global financial crisis, the growth
rate fell to a much lower plateau
What is Chinas potential growth rate?

4
 What is Chinas growth potential?
Two camps
Justin Lin: 8%, >7%
Bai Chongen:
20162020: 6.36% 6.9

20212025: 5.57%
 why
For Lin, Chinas per capita income
After having reached 7000$, Japan maintained 10
years high growth
Chinas per capital income at the moment, why
not be able to do the same?
For Bai
Labor productivity
Labor supply

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Growth of Japans labor productivity and labor supply
LP % Labor supply

>3%

>10
%

Chinas working-age population

 the obstacles to completing the long
journey
First: aging
Second: environmental and economic carrying
capacity.
Third: political stability and meritocracy
Fourth: the Lewis turning point
Fifththe adjustment of the economic imbalance is
difficult and time consuming
----- Martin Wolf

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 My view on Chinas growth potential
New growth plateau: failure of many stimulus
policies
China is paying more attention to the quality
of the growth

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Policy objectives: asset price, inflation
and growth
House 10QI,RRR
price
CPI low
10/4/27:Clamp down on real
estate
House prices
Loosening is
not aimed at
House prices
11/11/30 house prices

Inflation>3% RRR
but late
falling all the 12M5, mini-
2013monetary policy
way below stimulus
2%
14/11 RRR
Growth of E
4 trillion investment0

1.2010-2013 balancing act between growth and house price (real estate investment supports
growth, but house price should be contained); 2. 2014-2016 Sep. Destocking; 3. clamp down
on house price
 Below or above the potential?
The shift of the Phillips curve
CPI inflation: %
8%

trendline: 2011 Q1 -
2016Q2
6%

trendline: 1999 Q4 - 2010 Q4

4%

2%

0%

GDP growth ratge:

-2% %
6% 7% 8% 9% 10% 11% 12% 13% 14% 15%

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 To transit from high growth to a lower but
sustainable growth path
Overcapacity
Zombie enterprises vis--vis demand management
Expansionary fiscal and accommodative monetary policy
may be necessary
Corporation debt
Shadow banking WMPs and asset bubbles
LGFV
real estate investment fever
Extremely high M2/GDP ratio
Capital out flows and flights
inequitable income distribution

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 What we can learn from the past
adhering to the policy of opening up and
reform
ideological emancipation
Stability
Internal turmoil for hundred year: one rebel after
another. And then one political campaign after
another
World pace
Era of peace and development

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