China’s structural transformation: reaching potential GDP in the financial services sector

Abstract

China's economy faces the daunting challenge of shifting from a manufacturing-based economy to a service-based economy. Reforms in the services sector are slated to continue to take place in the coming years, including in the financial sector. In this paper, we explore China's success and challenges with structural change and then take a closer look at the financial services sector to find out where reforms have occurred, where the potential lies, and what the future will bring. We first describe structural change with regard to growth and TFP (total factor productivity), then as it applies to China. We examine China's financial services sector. Next, we calculate potential GDP of the financial services sector now and with the implementation of expected reforms. We find that, given even conservative estimates, the value added of the financial intermediation sector could double, as labor, capital, technology, and elasticity respond to liberalization policies. Whether potential GDP under reforms is reached is another question; therefore, we recommend that China both increase the pace of implementation, focusing in particular on reducing the oligopoly in the banking sector, increasing investment options by reforming its bond and equity markets, and enhancing innovation in the financial sphere while controlling for risk.

Coordinated Development Evaluation of Population–Land–Industry in Counties of Western China: A Case Study of Shaanxi Province

“…Coordinated development is the key feature of high-quality urbanization, which requires improvement in the total factor productivity (TFP) through coordinating production factors [6]. However, the growth rate of TFP in China's counties has fluctuated and even decreased in recent years [7,8], and the insufficient level of urbanization development in counties has become a shortcoming of the overall high-quality urbanization construction in China [9][10][11][12]. Thus, the key to constructing high-quality development in counties lies in the coordinated development.…”