Essential Conditions for China’s Growth in Its Course of Reform
Abstract: China’s extraordinary performance of economic growth is not without source. It has simultaneously resulted from the profound reform and wide opening-up as a sufficient condition and from demographic dividend as a necessary condition. The characteristic of consolidating reform, opening-up, growth, and sharing in China makes its experience an inclusive development. This paper looks back at China’s reform process to reveal how growth potentials have been translated into actual growth through factors accumulation and resources reallocation. It then points out that as the stage of dual economy development has altered and as a result demographic dividend has disappeared, the sustainable growth of the Chinese economy is facing big challenges. This paper concludes by proposing policy suggestions for deepening reform.
Keywords: conditions for development, demographic dividend, reform dividend JEL classification code: O53, O10, O43
DOI: 1 0.19602/j .chinaeconomist.2018.01.01
The extraordinary economic growth and the resulting substantial enhancement of national power during China’s 40-year reform period have been praised worldwide. It may not be surprising that getting rid of defects of the planned economy can shift economic activities back to their production possibility frontier – or economy-wide speaking, shift economic growth back to its potential rate. Hollis Chenery, former chief economist of the World Bank, reportedly insisted that pinpointing and then ameliorating key obstacles could accelerate growth in the absence of conditions that are widely seen as essential for development (Brandt and Rawski, 2008).
Although Chenery’s assertion affirmed the significance of institutional change, it does not seem reasonable to assume impressive economic growth is possible without tangible driving forces. Thus, some questions deserve to be answered, if one wants to gain a deeper understanding of China’s experience so as to draw lessons from the past, recognize the challenges facing the present, and prepare for the tasks of the future.
First, what were the unique sources that enabled China to have grown so fast for such a long time? In 1978-2015, China’s annual growth rate of real gross domestic product (GDP) was 9.7%, compared to 2.5% globally. Assuming the absence of conditions essential for development is of no help in finding out China’s potential growth capacity and its causes during the reform period.
Second, how have Chinese people shared the benefits of the fast-growing, expanding economy? Both Chinese and international observers have been quick to deny, explicitly or implicitly, the