THE SPEED AND QUALITY OF CHINA’S ECONOMIC GROWTH DURING THE COVID-19 PANDEMIC

Abstract

The purpose of this study is to understand the speed and quality of China’s economic growth during the COVID-19 pandemic. This study defines high-quality economic growth as a growth rate with a low variance and adopts quarterly time-series data for China’s real GDP growth rate to analyze its regime switches and structural changes by estimating a conditional Markov chain model. The study further utilizes the estimated parameters to predict the smoothed probabilities of each of four joint states for China’s real GDP growth rate from 2021 Q4 to 2025 Q3. The primary finding of this study is that, during the period from 2020 Q1 to 2021 Q3, the outbreak of COVID-19 shocked China’s economy and its economic growth rate fluctuated dramatically, which resulted in its variance being relatively high. However, China’s economic growth rate is very likely to gradually stabilize (as evidenced by a low variance) and to grow at a medium-to-high speed with high quality during the forecast period.