Is China seeing a great stagnation?

From ChinaRealTime:

China’s 1% average annual growth in total factor productivity between 1978 and 2012 – a period when average per capita annual incomes rose from $2,000 to $8,000 — compares with 4% annual gains for Japan during its comparable 1950-1970 high-growth period, 3% for Taiwan from 1966-1990 and 2% for South Korea from 1966-1990, he said, when purchasing power in the relative economies is taken into account.

“Our study shows that China’s spectacular growth in the reform period has been mainly investment-driven and quite inefficient,” Mr. Wu wrote.

A big problem, which often complicates efforts to assess the health of China’s economy, is the reliability of Chinese data. Using three measures of productivity, J.P. Morgan economist Haibin Zhu concludes in a research note that China’s total factor productivity grew 1.1% in 2013 from a 3.2% expansion in 2008. Mr. Wu draws on different methodology to argue that total factor productivity turned negative from 2007 to 2012.

“Correctly measuring China’s productivity has, not surprisingly, been obstructed by severe data problems that have resulted in widely contradictory productivity performance estimates,” Mr. Wu said.

I would classify this as highly speculative.  TFP is hard enough to measure in the first place, but in a rapidly growing economy productivity boosts are especially likely to be embodied in (and measured as) rising capital expenditures.  Still, it is an interesting perspective on what is the number one economic problem in the world today.


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