ABSTRACT
This chapter explains long-term growth potential from a supply-side perspective. It discusses the sources of change in productivity in China. The chapter analyzes the causes of the economic slowdown since 2008 from a productivity point of view. The economic growth after 2008 relied more on the sharp increase of the investment rate, hampering productivity and household consumption growth. In addition, economic stimulus measures have proven ineffectual in reversing the long-term decline in economic growth. The country needs a macro policy framework that can effectively tackle the drop in the growth rate of both labour force and labour productivity. Non-productive investment and the growth in the employment participation rate affect productivity growth negatively and positively, respectively, through their influence on the effective quantity of factor input. Government intervention has a significant and negative impact on productivity growth, as does the investment rate.
