SECTORAL FACTOR REALLOCATION AND PRODUCTIVITY GROWTH: RECENT TRENDS IN THE CHINESE ECONOMY

Abstract

Based on the data of six major sectors and 13 industrial sectors of the Chinese economy, this study examines the impact of sectoral factor reallocation on productivity growth for the period 1986-2000. According to the results, the earlier post-reform high productivity growth was not sustained in more recent years. The overall performance of inter-sector reallocation was also disappointing. Limited improvements in productivity growth were observed for the industrial sectors as China beefed up reforms of state-owned enterprises in the late 1990s. This evidence highlights the huge potential gains for a developing economy like China to build sound market institutions in line with greater market openness and inter-sector factor mobility.