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China’s Economy at the Crossroads

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Understanding China’s Real Estate Markets

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The Chinese economy has experienced impressive growth since the late 1970s, driven by ongoing market-based reforms as well as integration into the world economy. However, growth has been biased toward the industrial sector, investment, and exports. The recent buildup of private sector debt, rising inequality, and increasing environmental problems are casting shadows over the economic outlook. The chapter discusses the roots of the growth miracle as well as complications that have arisen in recent years as a result of a more challenging international environment, imbalanced growth in the domestic economy, and limited appetite to implement further liberalization.

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  1. 1.

    Valuation of GDP at purchasing power parities is typically used in international comparisons and aggregation of GDP and adjusts for the different levels of prices between countries. Because of a lower level of prices (of non-tradables in particular), real GDP in developing countries is typically inflated relative to real GDP in advanced economies compared to a conversion of GDP into a common currency (usually the US dollar) at market exchange rates.

  2. 2.

    The share for agricultural and producer goods was, however, considerably lower (55% and 45%, respectively). By 2003, however, most prices were market-determined. Notable exceptions include the price of water, electricity and other utilities, interest rates, natural gas, and crude oil, as well as refined oil products.

  3. 3.

    Quoted in Lardy (2012, 1).

  4. 4.

    See Batson and Zhang (2011) for a comparison of China’s capital stock compared to other countries at different stages of development. They conclude that in per capita terms, China’s capital stock is still low compared to the advanced economies.

  5. 5.

    With respect to the current account imbalance, he notes that the rise in savings relative to investment was a phenomenon occurring across all sectors—households, firms, and government—of the economy.

  6. 6.

    See Lardy (2012) and Fardoust et al. (2012) for overall positive assessments of China’s stimulus measures.

  7. 7.

    It is noteworthy, however, that the fiscal stimulus also did include measures aimed at boosting domestic consumption either directly through subsidies for the purchases of durable electronic goods or indirectly via the provision of affordable housing or health care services.

  8. 8.

    It is in the latter regard that we differ slightly from their approach: whereas they compute their own estimate of the initial capital stock using the properties of the production function, we rely on data from the Penn World Tables. We find that this delivers a more sensible capital-output ratio, in particular at the start of the sample.

  9. 9.

    Serrato Suarez et al. (2016), for example, document the manipulation of birth figures by Chinese mayors in order to comply with the one-child policy and secure promotions.

  10. 10.

    See Economist (2010) for details. It should, however, be noted that by construction the “Keqiang Index” is an imperfect proxy for overall economic activity, or GDP, as it is biased toward the heavy-industry-related sectors.


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Gern, KJ., Hauber, P. (2021). China’s Economy at the Crossroads. In: Wang, B., Just, T. (eds) Understanding China’s Real Estate Markets. Management for Professionals. Springer, Cham.

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