Es­sen­tial Con­di­tions for China’s Growth in Its Course of Re­form


China Economist - - Articles - CaiFang(蔡昉)

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

1. In­tro­duc­tion

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

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