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Haste Makes Waste: Policy Options Facing China after Reaching the Lewis Turning Point
Author(s) -
Cai Fang
Publication year - 2015
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12097
Subject(s) - economics , china , stimulus (psychology) , chinese economy , turning point , economic slowdown , demand side , supply side , sustainability , economic system , market economy , international economics , economic policy , macroeconomics , political science , psychology , ecology , physics , biology , acoustics , law , period (music) , psychotherapist
This paper provides a framework for assessing the health of China's macro economy and the sustainability of economic growth by combining supply‐side and demand‐side factors and by considering their relationship at different stages of development. As the Chinese economy passed through its Lewis turning point, weakened supply‐side factors caused its growth to slow. The increasing concern regarding the economic slowdown has induced both the central and local governments to implement various stimulus plans through instruments of macroeconomic, industrial and regional policies. By examining where the imbalances of the Chinese economy really lie and investigating the determinants of the current slowdown and of the enhancement of the potential growth rate, the present paper suggests that the best path of action for the Chinese Government is not to stimulate growth through demand‐side factors but to increase the potential growth rate through reforms in certain key areas.