Understanding the Factors Behind China’s Economic Growth and their Impact on Growth Trends in the Future

This paper identifies the factors that have led to China's economic growth in the past, and seeks to understand the role they may play in the future. 2021 marked the beginning of China’s 14th Five-Year plan to become a modernized socialist economy, which is keen on increasing more high-tech production. Despite an initial recovery from the effects of COVID 19, the lower than expected growth rate in the third quarter of 2021 has raised questions about economic slowdown. The crackdown on technology, private education, and the real estate sector plays into this slowdown. Literature review suggests that Total Factor Productivity (TFP) and Foreign Direct Investment (FDI) have played a major role in China’s GDP growth. I find a positive and statistically significant relationship between Real GDP and both FDI and TFP. Other factors like trade openness and capital to labor ratio have a positive but insignificant relationship. When making predictions on the future of the Chinese GDP, I argue that it is important to look at government interventions because the Chinese Communist Party (CCP) exercises great control over resources and their allocation. By looking at my empirical results and analyzing the effect of government initiatives like the Belt and Road Initiative and Made in China 2025, this paper will look at how the Chinese economy can sustain its economic growth in the near future.