ABSTRACT
With respect to economic integration among China, Hong Kong and Macau, both absolute and conditional β-convergence and δ-convergence on per capita gross domestic product (GDP) between these economies are observed. This implies that the initially poorer China can grow faster than the initially richer Hong Kong and Macau to reduce its overall income gap with them. Trade or foreign direct investment (FDI) flows were found to be controversial growth determinants in the process of income convergence. Although they contributed to accelerate the pace of the catching-up process, it is still unclear whether the output growth of China is attributed to input expansion or improvement in productivity. For this reason, the productivity level of China will be measured and analysed in this chapter in order to assess whether the economic reforms have brought about any improvement in technology and efficiency. Rather than focusing on the partial productivity of labour and capital, the total factor productivity (TFP) will be measured and decomposed. The result reflects the ability of a country to transform capital and labour inputs into output. It also helps to distinguish whether improved efficiency or better technology dominates the process of output growth. In addition, a comparative study of TFP will be conducted to investigate the issue of productivity differentials among China, Hong Kong and Macau in the post-reform period. Finally, the phenomenon of productivity convergence, which is a branch of convergence study according to Islam (1998), will be addressed again in order to test for the presence of any tendency for productivity convergence among China, Hong Kong and Macau.
