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Chinese housing prices rose by over 10 percent per year in real terms between 2003 and 2014 and are now between two and ten times higher than the construction cost of apartments. At the same time, Chinese developers built 100 billion square feet of residential real estate. This boom has been accompanied by a large increase in the number of vacant homes, held by both developers and households. This boom may turn out to be a housing bubble followed by a crash, yet that future is far from certain. The demand for real estate in China is so strong that current prices might be sustainable, especially given the sparse alternative investments for Chinese households, so long as the level of new supply is radically curtailed. Whether that happens depends on the policies of the Chinese government, which must weigh the benefits of price stability against the costs of restricting urban growth.

After more than three decades of high growth based on its low-wage advantage and relatively favorable demographics—in combination with market-oriented reforms and openness to the world economy—China is at a crossroads with a much higher wage and a shrinking work force. Future growth will depend, by necessity, more on the generation of increased productivity, and domestic innovation will play an important part in this. In this paper, we assess the likelihood that China can make the necessary transition. Using data on expenditure on research and development, and patent applications, receipts, and citations, we show that the Chinese economy has become increasingly innovative. We will argue that rising wages and expanding markets are among the important drivers of China's growth in innovation. On the other hand, we find evidence of resource misallocation in the innovation area: while state-owned firms receive more subsidies, private firms exhibit more innovation results. Innovation can presumably progress even faster if resource misallocation can be tackled.

In 1979, China introduced its unprecedented one-child policy, under which households exceeding the birth quota were penalized. However, estimating the effect of this policy on family outcomes turns out to be complicated. China had already enacted an aggressive family planning policy in the early 1970s, and its fertility rates had already dropped sharply before the enactment of the one-child policy. The one-child policy was also enacted at almost the same time as China's market-oriented economic reforms, which triggered several decades of rapid growth, which would also tend to reduce fertility rates. During the same period, a number of other developing countries in East Asia and around the world have also experienced sharp declines in fertility. Overall, finding defensible ways to identify the effect of China's one-child policy on family outcomes is a tremendous challenge. I expound the main empirical approaches to the identification of the effects of the one-child policy, with an emphasis on their underlying assumptions and limitations. I then turn to empirical results in the literature. I discuss the evidence concerning the effects of the one-child policy on fertility and how it might affect human capital investment in children. Finally I offer some new exploratory and preliminary estimates of the effects of the one-child policy on divorce, labor supply, and rural-to-urban migration.

It has been 40 years since Deng Xiaoping broke dramatically with Maoist ideology and the Maoist variant of socialism. Since then, China has been transformed. Forty years ago, in 1978, China was unquestionably a socialist economy of the familiar and well-studied “command economy” variant, even though it was more decentralized and more loosely planned than its Soviet progenitor. Twenty years ago—that is, by the late 1990s—China had completely discarded this type of socialism and was moving decisively to a market economy. China today is quite different both from the command economy of 40 years ago, and from the “Wild West Capitalism” of 20 years ago. Throughout these enormous changes, China has always officially claimed to be socialist. Does the “socialist” label make sense when applied to China today?

In this paper, we document basic facts regarding public debates about controversial political issues on Chinese social media. Our documentation is based on a dataset of 13.2 billion blog posts published on Sina Weibo—the most prominent Chinese microblogging platform—during the 2009–2013 period. Our primary finding is that a shockingly large number of posts on highly sensitive topics were published and circulated on social media. For instance, we find millions of posts discussing protests, and these posts are informative in predicting the occurrence of specific events. We find an even larger number of posts with explicit corruption allegations, and that these posts predict future corruption charges of specific individuals. Our findings challenge a popular view that an authoritarian regime would relentlessly censor or even ban social media. Instead, the interaction of an authoritarian government with social media seems more complex.

In this paper, we consider the sources and prospects for economic growth in China with a focus on human capital. First, we provide an overview of the role that labor has played in China's economic success. We then describe China's hukou policy, which divides China's labor force into two distinct segments, one composed of rural workers and the other of urban workers. For the rural labor force, we focus on the challenges of raising human capital by both increasing basic educational attainment rates as well as the quality of education. For the urban labor force, we focus on the issues of further expanding enrollment in college education as well as improving the quality of college education. We use a regression model to show the typical relationship between human capital and output in economies around the world and demonstrate how that relationship has evolved since 1980. We show that China has made substantial strides both in the education level of its population and in the way that education is being rewarded in its labor markets. However, as we look ahead, our results imply that China may find it impossible to maintain what appears to be its desired growth rate of 7 percent in the next 20 years; a growth rate of 3 percent over the next two decades seems more plausible. Finally, we present policy recommendations, which are rooted in the belief that China continues to have substantial room to improve the human capital of its labor force.

Over the last 30 years, China's economy has boomed. This trend has lifted hundreds of millions of Chinese out of poverty but it has also sharply increased local, regional, and global pollution levels. We look at the rise in air pollution over recent decades, and the perhaps surprising finding that in many of China's urban areas, levels of particulates (of less than 10 microns) have been decreasing during the last 10 to 15 years. We then turn to the costs and tradeoffs of air pollution, including costs to human health, reductions in worker productivity, and how people are seeking to reduce their exposure to pollution as shown by compensating differentials in real estate prices and purchases of masks and air filters. We discuss how rising incomes tend to raise the demand for environmental amenities and thus increase political pressure for environmental protection, and then we turn to the policy tools that China has used to reduce pollution. We conclude by arguing that as China's government is preparing for an additional 300 million people to move to urban areas over the next 30 years, it will have a number of opportunities for China to reduce pollution through a shift from manufacturing to services, along with various steps to improve energy efficiency and resource conservation. Overall, it seems that China is on track to improve its environmental performance in the years ahead.

The pace and scale of China's economic transformation have no historical precedent. In 1978, China was one of the poorest countries in the world. The real per capita GDP in China was only one-fortieth of the U.S. level and one-tenth the Brazilian level. Since then, China's real per capita GDP has grown at an average rate exceeding 8 percent per year. As a result, China's real per capita GDP is now almost one-fifth the U.S. level and at the same level as Brazil. This rapid and sustained improvement in average living standard has occurred in a country with more than 20 percent of the world's population so that China is now the second-largest economy in the world. I will begin by discussing briefly China's historical growth performance from 1800 to 1950. I then present growth accounting results for the period from 1952 to 1978 and the period since 1978, decomposing the sources of growth into capital deepening, labor deepening, and productivity growth. But the main focus of this paper will be to examine the sources of growth since 1978, the year when China started economic reform. Perhaps surprisingly, given China's well-documented sky-high rates of saving and investment, I will argue that China's rapid growth over the last three decades has been driven by productivity growth rather than by capital investment. I also examine the contributions of sector-level productivity growth, and of resource reallocation across sectors and across firms within a sector, to aggregate productivity growth. Overall, gradual and persistent institutional change and policy reforms that have reduced distortions and improved economic incentives are the main reasons for the productivity growth. [PUBLICATION ABSTRACT]

Over the past few decades of economic reform, China's labor markets have been transformed to an increasingly market-driven system. China has two segregated economies: the rural and urban. Understanding the shifting nature of this divide is probably the key to understanding the most important labor market reform issues of the last decades and the decades ahead. From 1949, the Chinese economy allowed virtually no labor mobility between the rural and urban sectors. Rural-urban segregation was enforced by a household registration system called “hukou.” Individuals born in rural areas receive “agriculture hukou” while those born in cities are designated as “nonagricultural hukou.” In the countryside, employment and income were linked to the commune-based production system. Collectively owned communes provided very basic coverage for health, education, and pensions. In cities, state-assigned life-time employment, centrally determined wages, and a cradle-to-grave social welfare system were implemented. In the late 1970s, China's economic reforms began, but the timing and pattern of the changes were quite different across rural and urban labor markets. This paper focuses on employment and wages in the urban labor markets, the interaction between the urban and rural labor markets through migration, and future labor market challenges. Despite the remarkable changes that have occurred, inherited institutional impediments still play an important role in the allocation of labor; the hukou system remains in place, and 72 percent of China's population is still identified as rural hukou holders. China must continue to ease its restrictions on rural–urban migration, and must adopt policies to close the widening rural–urban gap in education, or it risks suffering both a shortage of workers in the growing urban areas and a deepening urban–rural economic divide.

In recent decades, cheap labor has played a central role in the Chinese model, which has relied on expanded participation in world trade as a main driver of growth. At the beginning of China's economic reforms in 1978, the annual wage of a Chinese urban worker was only $1,004 in U.S. dollars. The Chinese wage was only 3 percent of the average U.S. wage at that time, and it was also significantly lower than the wages in neighboring Asian countries such as the Philippines and Thailand. The Chinese wage was also low relative to productivity. However, wages are now rising in China. In 2010, the annual wage of a Chinese urban worker reached $5,487 in U.S. dollars, which is similar to wages earned by workers in the Philippines and Thailand and significantly higher than those earned by workers in India and Indonesia. China's wages also increased faster than productivity since the late 1990s, suggesting that Chinese labor is becoming more expensive in this sense as well. The increase in China's wages is not confined to any sector, as wages have increased for both skilled and unskilled workers, for both coastal and inland areas, and for both exporting and nonexporting firms. We benchmark wage growth to productivity growth using both national- and industry-level data, showing that Chinese labor was kept cheap until the late 1990s but the relative cost of labor has increased since then. Finally, we discuss the main forces that are pushing wages up. [PUBLICATION ABSTRACT]