China: Global Crisis Avoided, Robust Economic Growth Sustained
Figure 4.2. Saving and Investment in China 25
% GDP
20
15
10
5
0 1992
1996 households
2000 enterprises
2004 government
Source: CEIC China Database; World Bank staff estimates. Note: Flow-of-funds data.
Thanks to China’s traditionally conservative fiscal policy, government expenditure has been less than revenue. In particular, the government’s current spending has lagged because Beijing has traditionally set aside a large share of revenues to finance investment. Much of China’s GDP growth since the early 1990s has come from the explosive growth in industrial production. Industrial value added has increased by an annual average rate of 12.3 percent during 1990– 2007, and the share of industry in GDP (in current prices) rose from 41 percent to almost 49 percent—among the highest for any country since the 1960s. In fact, the increase would have been larger but for declining relative prices in industry. In constant 1995 prices, the share of industry in GDP rose from 37 percent in 1990 to 54 percent in 2007 (figure 4.3). During 2003–07, the industrial sector contributed 60 percent of total GDP growth; just 5 percent was from agriculture and 35 percent was from the services sector. On the whole, more than 80 percent of the growth in industry during 1993–2005 was due to higher labor productivity (figure 4.4) rather than more employment. This is attributable mainly to the large-scale investment effort and increased capital-to-labor ratio. Of course, the low
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