Reblancing China's economy - modeling a policy package
Updated: 2008-02-18 14:35
This paper discusses how China can rebalance its pattern of growth by implementing a package of policies and shows the results of a modeling exercise implementing this package using a computable general equilibrium model. The paper is a background paper for the World Bank's forthcoming Country Economic Memorandum for China. The paper discusses a package of policy reforms that can address most of the downsides of the current pattern of growth--high saving and investment, high resource and energy intensity, environmental impact, inequality, the small role of private consumption, and a large and growing external imbalance--while keeping growth going. The paper discusses the modeling of future growth in China under 2 scenarios with a computable general equilibrium model. The first scenario is "on past trends". The second one is a "rebalanced" scenario, with the package of policy reforms implemented. The rebalanced scenario looks significantly better on the dimensions currently of concern to the government, while achieving broadly comparable overall growth. The modeling work suggests that, with the right package of policy reforms, it is possible for China to continue to grow rapidly while relying less on industry and investment, and more on services and efficiency gains, including via reallocation of labor and capital.
Full text: http://www.worldbank.org.cn/english/content/working_paper7.pdf