After decades of spectacular growth, China’s economy has slowed down in recent years. This note examines China’s long-term growth prospects within the dynamics of its rapid demographic transition. It scrutinizes China’s demographic trends and growth potential, employing an analysis of various scenarios to address uncertainties in productivity trends. The conventional growth accounting methodology is utilized to dissect the economic growth into components associated with changes in factor inputs and a residual factor representing total factor productivity (TFP). Additionally, we explore policy options that could serve to alleviate demographic and other growth impediments. Our projection, aligning with recent estimates of China’s growth potential, suggests that China is poised to become the world’s largest economy by 2042, with its per capita GDP projected to reach 31 percent of the U.S. by 2050 under the baseline scenario.
Analytical Notes