Productivity Growth in the Chinese Economy by Industry and the Role of Foreign Capital

The purpose of this paper is to estimate total factor productivity (TFP) growth in China byindustry. As well as reviewing some previous studies on TFP growth in China, the authorspresent their estimation of TFP growth in China for two periods, 1987–1992 and 1992–1997. During both periods, output growth was as high as double digits. However, thedifferences in TFP growth between these two periods were remarkable. In the first period,wide-ranging TFP growth was observed, whereas in the latter period, high TFP growthwas concentrated in industries such as “transportation equipment” and “electricmachinery”, which are known for actively introducing foreign capital and technologies. Infact, positive relations were confirmed among TFP growth, export performance, and theintroduction of foreign capital. Foreign capital made a large contribution to China’s export-led growth.