IMF Working Papers

China’s Path to Sustainable and Balanced Growth

By Dirk V Muir, Natalija Novta, Anne Oeking

November 15, 2024

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Format: Chicago

Dirk V Muir, Natalija Novta, and Anne Oeking. "China’s Path to Sustainable and Balanced Growth", IMF Working Papers 2024, 238 (2024), accessed November 21, 2024, https://0-doi-org.library.svsu.edu/10.5089/9798400293467.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

After decades of high growth, the Chinese economy is facing headwinds from slowing productivity growth and a declining workforce that are projected to lower potential growth substantially in the longer term. We project China’s potential growth over the medium to long term, showing that potential growth could slow to around 3.8 percent on average between 2025-30 and to around 2.8 percent on average over 2031-40 in the absence of major reforms. We present a reform scenario with structural reforms to lift productivity growth and rebalancing China’s growth towards more consumption, that would help China transition to “high-quality”—balanced, inclusive, and green—growth. We use production function and general equilibrium modelling approaches to show that potential growth could remain at around 4.3 percent between 2025-40 under the reform scenario.

Keywords: Demographic trends, Investment-led growth, Potential growth, Rebalancing, Structural reforms

Publication Details