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Federal Reserve Bank of St. Louis
Review
Potential output in a rapidly developing economy: the case of China and a comparison with the United States and the European Union
Jinghai Zheng
Angang Hu
Arne Bigsten
Abstract

The authors use a growth accounting framework to examine growth of the rapidly developing Chinese economy. Their findings support the view that, although feasible in the intermediate term, China's recent pattern of extensive growth is not sustainable in the long run. The authors believe that China will be able to sustain a growth rate of 8 to 9 percent for an extended period if it moves from extensive to intensive growth. They next compare potential growth in China with historical developments in the United States and the European Union. They discuss the differences in production structure and level of development across the three economies that may explain the countries' varied intermediate-term growth prospects. Finally, the authors provide an analysis of "green" gross domestic product and the role of natural resources in China's growth.


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Jinghai Zheng & Angang Hu & Arne Bigsten, "Potential output in a rapidly developing economy: the case of China and a comparison with the United States and the European Union" , Federal Reserve Bank of St. Louis, Review, issue Jul, pages 317-342, 2009.
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Keywords: Economic development ; Economic conditions - United States ; Economic conditions - China ; European Union
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