China's Growth Slowdown: Lessons from Japan's Experience and the Expected Impact on Japan, the USA and Germany

25 Pages Posted: 16 Sep 2016

See all articles by Kyoji Fukao

Kyoji Fukao

Hitotsubashi University - Institute of Economic Research

En Csmar

Fudan University

Date Written: September–October 2016

Abstract

China is switching from economic growth based on extremely rapid capital accumulation to economic growth based on structural reforms and accelerated total factor productivity growth. Meanwhile, China will also face a serious excess saving problem as capital accumulation slows and, hence, needs to reduce its private saving rate. Based on this analysis, we estimated the economic impact of China's growth slowdown and hypothetical economic transformation on Japan, the USA and Germany using the world input–output database. We compared the following three scenarios for China's final demand in 2020 and economic growth from 2015 to 2020: (i) an optimistic scenario (GDP growth rate = 6.2%, investment/GDP = 0.501); (ii) a slowdown scenario (GDP growth rate = 4%, investment/GDP = 0.501); and (iii) a structural reform scenario (GDP growth rate = 6.2%, investment/GDP = 0.3). Our analysis suggests that Japan and Germany would suffer more from structural reforms in China than from a slowdown in growth. Meanwhile, for the USA, the employment decline triggered by structural reforms would be much smaller than the employment decline caused by a slowdown in growth.

Keywords: excess saving, natural rate of growth, total factor productivity, world input–output database

JEL Classification: D24, F17, O47, O57, R15

Suggested Citation

Fukao, Kyoji and Csmar, En, China's Growth Slowdown: Lessons from Japan's Experience and the Expected Impact on Japan, the USA and Germany (September–October 2016). China & World Economy, Vol. 24, Issue 5, pp. 122-146, 2016, Available at SSRN: https://ssrn.com/abstract=2839584 or http://dx.doi.org/10.1111/cwe.12177

Kyoji Fukao (Contact Author)

Hitotsubashi University - Institute of Economic Research ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8306
Japan

En Csmar

Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China

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