Discussion Papers

No.883 Revisiting the Role of ICT in China’s Growth

by David Tao Liang, Harry X. Wu

March 2023


Based on the pioneering work on the estimation of China’s information and communication technology (ICT) assets by industry in Liang, Wu, and Fukao (2022) and the substantial revisions of the China Industrial Productivity (CIP) capital and labor accounts, we revisit the role of ICT in the Chinese economy since the reform. Methodologically, we follow our earlier growth accounting work to quantify the role of China’s ICT (Wu and Liang, 2017) a la Jorgenson (2001). However, the newly available data allows us to investigate ICT-specific industries, identified by the direct measure of ICT intensity, in a framework that is coherently integrated with the CIP capital accounts including the estimated stock of IT and CT assets. Our new results still support our earlier findings that Chinese ICT-producing and intensive-using industries in manufacturing were the key drivers to China’s productivity growth. We show that over the 40 years investigated since 1978, while providing 34 percent of China’s 8.3 percent annual value-added growth, these major ICT players contributed 132 percent of China’s 1.1 percent annual total factor productivity (TFP) growth. We can therefore reiterate the proposition proposed in our 2017 paper that the rapid development of the ICT industries enabled the Chinese economy to compensate for its heavy productivity losses caused by other industries and the policy-induced misallocation of capital resources.

Keywords: ICT making and ICT intensive using, APPF growth accounting, aggregation by Domar weights, resource reallocation, TFP

JEL classification: C82, E22, E24, O47

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.