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China through 2020 : a macroeconomic scenario (English)

This paper sketches a macroeconomic scenario for China for 2010-20. The growth accounting exercise finds that, with both the working population and total factor productivity on course to decelerate, potential gross domestic product (GDP) growth is likely to moderate in the coming 10 years, despite still sizeable capital deepening. Actual GDP should grow broadly as fast as potential GDP, continuing the track record since the late 1990s. With some rebalancing expected, the share of consumption in GDP is likely to bottom out and to rise somewhat through 2015 while the share of investment edges down. Robust economic growth in China will support imports. Meanwhile, given the outlook for the world economy, the share of exports in GDP may decline in 2010-2015 despite good competitiveness. As a result, the trade surplus may diminish relative to the size of China's economy. Even so, the external surplus will continue to rise in US dollar terms, especially the current account. In 2020 China's GDP per capita will be broadly comparable to the current level in Latin America, Turkey, and Malaysia. Adjusted for purchasing power, in 2020 China's GDP per capita will be one-fourth of the US level and China's total economy larger than that of the US. The pace of catch up in current prices and market exchange rates will depend on the extent of real exchange rate (RER) appreciation. Past experience internationally suggests that, with a large portion of labor employed in agriculture, RER appreciation may be modest in the coming decade. However, demographic changes may speed up the tightening of the labor market and trend RER appreciation. Reflecting this uncertainty, two scenarios are presented, suggesting China may become the largest economy on this metric sometime between 2020 and 2030.


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    East Asia and Pacific,

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    China through 2020 : a macroeconomic scenario

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    real exchange rate appreciation;market exchange rate;real effective exchange rate;external current account surplus;future real exchange rate;external terms of trade;early stage of development;domestic demand;global market share;total factor productivity;contribution of capital;unit labor costs;elasticity of output;international economic crisis;share of investment;surplus labor;import growth;economies of scale;share of export;drag on growth;real estate market;trade and fdi;global financial crisis;urban labor market;household disposable income;human capital formation;relative price change;labor productivity growth;decomposition of growth;export gdp ratio;real estate investment;contribution of investment;short term impact;labor market policy;Foreign Exchange Reserve;higher government spending;education and health;future living standard;purchasing power parity;adjustment of price;world trade growth;elasticity of export;real export growth;allocation of capital;share of labor;Local Government Finance;international capital market;employment in agriculture;exchange rate regime;current account balance;demand for energy;access to finance;financial sector reform;working population;potential output;capital stock;constant price;world economy;Exchange Rates;dollar term;ppp terms;export volume;real growth;capital accumulation;external trade;production function;employment growth;capital deepening;adjustment factor;expenditure component;real appreciation;trade surplus;foreign reserve;high share;output gap;net export;Public Services;demographic change;manufacturing sector;financial system;heavy industry;agricultural employment;bank lending;supply side;domestic economy;accounting framework;domestic activity;tradable sector;employment share;productivity increase;average share;central authority;mitigating risk;wage growth;linear function;Financial Stability;sensitivity analysis;traded goods;agricultural market;real gdp;future price;capital inflow;manufacturing industry;global recession;asian countries;reducing inequality;Dividend policies;policy package;Social Sciences;labor dispute;labor economics;data availability;constant rate;urban people;trade relationship;land reform;spare capacity;accurate estimate;price difference;Economic Policy;large population;fiscal system;price pressure;metal price;international energy;Job Creation;longer period;import volume;commodity price;tax cut;consumer subsidy;absolute amount;Macroeconomic Management;labor supply;macroeconomic variable;global environment;trend growth;heavy reliance;economic reform;income disparity;infrastructure spending;capital control;financial problem;rural area;consumption growth;global economy;property price;take time;efficiency gain;driving force;private consumption;Capital Inflows;household income;fiscal support;high inflation;household consumption;external deficit;estimation period;production capacity;investment growth;demographic projection;social security;external reserve;external balance;trade datum;traditional pattern;trading partner;trade flow;domestic sourcing;crowding out;supply chain;domestic price;saving rate;percent change;import share;parameter estimate;real import;hot money;employment statistic;market growth;wage increase;trade balance;average elasticity;external asset;upper bind;public-private partnership;



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China through 2020 : a macroeconomic scenario (English). World Bank China office research working paper ; no. 9 Washington, D.C. : World Bank Group.