On October 9, a paper named A Quantitative Description of the Economic Growth’s Secular Trend and Economic New Normal in China was published on the WeChat official account of Economic Research Journal.
Authored by Professor Wang Shaoping and HUST Ph.D candidate Yang Yang, the paper aimed at the economic new normal in China. It traced the originality of the economic growth consecutive decline, theoretical and practical evidence of supply-side structural reform and its secular trend to economic growth. Also, it analyzes the main quantitative features of economic new normal and its macro management.
The paper used SVECM and SMA to distinguish long term impacts from short term ones and estimates impact effects. Long term impact is defined as the impact which exerts a long lasting influence and represents factors affect long term economic growth, such as technology progress, institutional reform, etc. Meanwhile, short term impact only affects economic growth in short terms and it represents short term economic fluctuation factors, such as nominal currency and expected variances. By making SVECM，the thesis primarily divided the GDP statistics in China into long term trends and short term factors.
According to the result, there is a structural downturn, which means structural reduction, in the GDP’s long term developing trend. It reveals the reason why the economy declines from 2010.
The paper researched factors which affect economy’s long term growth from the perspective of economy theory. Such factors would lead to a steady growth with time passing by. It included the long lasting improvement of the educational level of workers and demographic dividend. Also, impact effect like technology development and innovation, new economic forms, new products and total factor productivity should be taken into consideration. On that basis, the paper proved that the structural downturn in long terms was basically in accordance with the long term factors which affect China’s economic growth. So, it makes a conclusion that the macro-economy in China shows a weak supply characteristic.
On this basis, it infered the data range of long term trends and economic growth rate according to the long term trends and short term influences of GDP. Then it made a conclusion that the economic growth rate in China depends on a double tail truncation normal distribution. Referencing such a distribution, it calculated the economic growth range of maximum probability, which means the steady GDP growth range. After that, it described the main characteristics of economic new normal: GDP’s long term growth ranges from 5.5 percent to 7.5 percent; GDP’s growth rate ranges from 4.9 percent to 8.3 percent; Economic growth rate will ranges from 6 percent to 7.5 percent at a probability of 91.5 percent, so that the steady range of the economic growth rate is between six percent to 7.5 percent. The result described the main quantitative characteristics of economic new normal in China, which had remarkable practical significance. The paper also proposed policy suggestions according to the structural downturn in long terms and the steady growth range. The suggestions pointed out the key point of macro management, that is: transform the macro control which mainly use demand stimulation into the macro management which attach importance to reinforce supply side structural reform, promote and cultivate long term economic growth factors.