China’s economic growth has been remarkable since the reform started in 1978. There is an
ongoing debate about whether this performance is driven mainly by productivity growth or by factor
accumulation. But few past studies taken human capital into account, and thus contained an omission
bias. In this paper, we construct a measure of China’s human capital stock over 1952 – 1999 and
employ it in our growth accounting exercise. We find that, first, in China, the accumulation of human
capital was quite rapid and it contributed significantly to growth and welfare; second, after
incorporating human capital, the growth of total factor productivity (TFP) still played a positive role
in GDP growth in the reform period, while it was negative in the prereform period. These results are
robust changes in labor shares in GDP and in depreciation rates. An implication is that a high priority
should be given to human capital accumulation and productivity growth, if China is to sustain its
growth and welfare improvement in the next decade