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China's extremely fast development since the late seventies has been truly remarkable. However, more recently, concerns regarding the mid-term sustainability of its growth pattern have been raised. In particular, the central role of investment as the economy's main growth engine has generated concern about possible excess capacity build-ups in certain sectors. In order to help us assess the future potential growth of the Asian giant, this paper examines the contributions to economic growth over the last thirty years of the increase in the labor force, physical and human capital accumulation, as well as technological progress. The growth accounting methodology employed highlights the key role played by physical capital – with an increasing contribution over time – and by technological progress –despite its recently smaller contribution–. The analysis suggests that, while the importance of the labor force has been secondary, improvements in the quality of workers are now becoming apparent. Furthermore, the document describes the policies that have shaped the differential development of each factor, and then describes a new generation of reforms, some already underway, which will continue to ensure the growth of the Chinese economy. More concretely, these measures are related to the restructuring of state-owned enterprises, the liberalization and modernization of the financial system and the exchange rate regime. With these reforms, China could sustain growth rates over 6% over the medium term, which would allow the country to achieve the GDP level of the United States in the next twenty years.

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