No. E2018003                                                                                                                                                                                  2018-4-4

Abstract

China has been experiencing persistent growth slowdown in the past decade. What is main cause for this slowdown and what policy recommendations should be provided?  In this paper, a simple model is used to illustrate the key differences between Prof. Justin Lin and Prof. Guoqiang Tian in their arguments, and their logical predictions are examined and confronted with real-life data. Conclusion is reached that China’s growth slowdown is mainly driven by negative and persistent external demand shocks. Further discussions from the perspective of New Structural Economics are provided to show how policy recommendations are different from the standard Keynesian argument and why structures are endogenous and relevant.

Key words: Chinese economy, growth, New Structural Economics.

JEL Classifications codes: H11, P26, O11, O40

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