Analysis of China’s Total Factor Productivity Performance Based on Cross-economy Comparison

This study aims to investigate China’s total factor productivity (TFP) growth rate, TFP level, and TFP growth’s contribution to the country‘s economic growth over the 1992-2018 period. Applying the growth accounting framework, the TFP growth rate is estimated by using the Solow residual. The results show that TFP growth has become an important source of China’s economic growth but there has been a mild slowdown in China’s TFP growth in recent years. A cross-economy comparison shows that TFP growth in China is both much faster and plays a more significant role in its economic growth, as compared with other noteworthy economies. The results also indicate that China’s TFP level, while still being relatively low, has the potential to reach significantly higher levels in the future. The empirical analysis in this study tends to support the argument that China’s growth is sustainable in the long run, but also indicates that improving its TFP level will be a necessary and long-term task.