The Chinese University of Hong Kong-Tsinghua University Joint Research Center for Chinese Economy 清華大學-香港中文大學中國經濟聯合研究中心 - Growing Like China The Chinese University of Hong Kong-Tsinghua University <br/>Joint Research Center for Chinese Economy 清華大學-香港中文大學中國經濟聯合研究中心
0030
Growing Like China
Zheng (Michael) Song, Kjetil Storesletten, Fabrizio Zilibotti

We construct a growth model consistent with China’s economic transition: high output growth, sustained returns on capital, reallocation within the manufacturing sector, and a large trade surplus. Entrepreneurial firms use more productive technologies, but due to financial imperfections they must finance investments through internal savings. State-owned firms have low productivity but survive because of better access to credit markets. High-productivity firms outgrow low-productivity firms if entrepreneurs have sufficiently high savings. The downsizing of financially integrated firms forces domestic savings to be invested abroad, generating a foreign surplus. A calibrated version of the theory accounts quantitatively for China’s economic transition.

606
0030
Growing Like China
Zheng (Michael) Song, Kjetil Storesletten, Fabrizio Zilibotti

We construct a growth model consistent with China’s economic transition: high output growth, sustained returns on capital, reallocation within the manufacturing sector, and a large trade surplus. Entrepreneurial firms use more productive technologies, but due to financial imperfections they must finance investments through internal savings. State-owned firms have low productivity but survive because of better access to credit markets. High-productivity firms outgrow low-productivity firms if entrepreneurs have sufficiently high savings. The downsizing of financially integrated firms forces domestic savings to be invested abroad, generating a foreign surplus. A calibrated version of the theory accounts quantitatively for China’s economic transition.

606