Social Sciences in China (Chinese Edition)

No.1, 2013

 

How Can Chinese Economy Achieve the Transition toward Total Factor Productivity Growth?

(Abstract)

 

Cai Fang

 

With the arrival of the “Lewis turning point” characterized by labor shortage and wage increase, and with the disappearance of “demographic dividend” as reflected in a halt in the decline of dependency ratio, Chinese economy has entered into a transition from the phase of dualistic economy to that of neoclassical growth. During the transition, the phenomenon of decreasing returns to capital begins to appear, and the largescale investment guided by the government becomes unsustainable to maintain the economic growth rate. Our study from the perspectives of economic growth theory, international experience and Chinese realities reveals that China should make necessary policy adjustments to develop a domestic “flying geese” model and nurture a “creative destruction” policy environment to obtain efficiency in resource reallocation, and should gain a higher efficiency from technological advance and institutional improvement to promote the transition of Chinese economy towards a growth model sustained by total factor productivity.