Key Definitions

Computable General Equilibrium (CGE): A model, which utilizes actual economic data to estimate the impact of external shocks (e.g. policies, technology) to an economy.

Gross Domestic Product (GDP): The total monetary value of all officially recognized final goods and services produced within a country in a specific time period. It is used as a key measure of economic growth.

Gini Coefficient: A statistical measure of the income distribution of a country’s residents. It helps to identify the gap between the rich and poor.
Total Factor Productivity (TFP): A measure, which represents the amount of output not directly related to the amount of inputs (e.g. materials). Economic planners look at these factors to explain growth of a corporate or national economy.

Main Facts

Hofman & Kujis argue that economic growth in China is not only reflected by GDP growth but also its sustainability should be considered. China’s economic growth has been exceptional, as it has lifted millions out of poverty. Overall, the Chinese population has prospered greatly, however the Gini coefficient indicates that there is a significant income disparity. Furthermore, the Chinese economy is heavily dependent on the manufacturing industry, investments and external demand. These three cause multiple negative externalities for the nation, such as environmental pollution, dependency on foreign resources due to high-energy consumption and income inequalities that cause social instability. Also, low employment- and TFP-growth, and a too narrow developed domestic demand further amplify problems with China’s current growth model. On basis of the prior analysis, the authors make two predictions using the CGE-model to evaluate both possibilities. First, continuing with the traditional pattern will become increasingly difficult, economically, environmentally, socially and