Productivity at your daily life

Since 1978, rapid capital accumulation and improvements in productivity are the major factors explaining China’s rapid economic growth. Increases in the overall labour supply have played a relatively small role in fuelling economic growth, although the impact of the reallocation of labour resources should not be altogether ignored. A substantial body of research on China’s economic growth from 1978 to 1997 confirms that capital input accounts for nearly 60 per cent of China’s economic growth in this period; improvements in productivity represent 30 per cent of growth, while the expansion of aggregate labour supply represents only 12 per cent of growth.

This investment has been increasing at a high rate. Since the outset of reforms and opening to the outside world, China’s investment rate has remained at around 35 per cent of GDP. The investment rate in about half of the years from 1978 to 2000 was close to or above 40 per cent. This high investment rate can be in part explained by the fast-growing income of the Chinese people and their high propensity to save. From 1980 to 2000, total bank savings rose from 160 billion renminbi to 12 trillion renminbi, of which private savings grew from 40 billion renminbi, or 25 per cent of total savings, to 6.4 trillion renminbi, or 52 per cent of total savings. Another factor supporting rising investment was the large inflow of foreign investment as a result of preferential foreign investment policies. From 1979 to 2000, China received a total of US$518.9 billion in foreign investment.

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