China’s Eco­nomic Growth and Struc­tural Tran­si­tion since 1978


China Economist - - Articles - ZhangPing(张平)andNanYu(楠玉)


Over the past 40 years of re­form and open­ing-up dur­ing 1978-2018, China’s rapid eco­nomic growth has be­come a mir­a­cle in world eco­nomic his­tory and re­shaped the world econ­omy. In the 40 years, China has suc­cess­fully trans­formed from an iso­lated agri­cul­tural coun­try into the world’s largest in­dus­trial man­u­fac­turer. In 2018, China’s ur­ban­iza­tion rate is ex­pected to reach 60% with per capita GDP ex­pected to reach 9,000 USD. Af­ter an­other 5 to 8 years, China will join the rank of high- in­come coun­tries, suc­cess­fully cross the mid­dle-in­come trap and be­come a mod­er­ately pros­per­ous econ­omy in all re­spects. In its mod­ern­iza­tion drive, China will fol­low the new con­cept of “in­no­va­tion, co­or­di­nated, green, open and shared de­vel­op­ment” and strive to achieve its “two cen­ten­nial goals”.


growth tran­si­tion, high- qual­ity de­vel­op­ment, ser­vice- based econ­omy, re­shap­ing of ef­fi­ciency model.

JEL clas­si­fi­ca­tion code: N15, N65, O14

DOI: 1 0.19602/j .chi­nae­conomist.2018.01.02

1. China’s Rapid Growth since 1978 and In­ter­na­tional Com­par­i­son

China’s sus­tained and rapid eco­nomic growth over the past four decades has re­shaped the world econ­omy. In 2016, China contributed 41% of world eco­nomic growth. In the new nor­mal, China has shifted from rapid yet volatile growth to medium-high growth rates with less volatil­ity.

1.1 China’s Rapid Growth

Since re­form and open­ing-up in 1978, China’s econ­omy has been grow­ing at al­most 10%. In the first 25 years dur­ing 1978-2002, China’s GDP growth rate av­er­aged 9.7%. This pe­riod can be di­vided into the fol­low­ing stages: the in­cep­tion of China’s re­form and open­ing-up pro­gram, the pe­riod of bring­ing or­der to chaos and im­ple­ment­ing ru­ral land con­tract sys­tem dur­ing 1978-1984, the de­vel­op­ment of town­ship and vil­lage en­ter­prises dur­ing 1985-1988, and the pe­riod of eco­nomic ad­just­ment dur­ing 19891991. Deng Xiaop­ing’s talks dur­ing his tour to south China un­veiled a new chap­ter of China’s open­ing-up in full swing. The Third Plenum of the 14th CPC Cen­tral Com­mit­tee in 1994 es­tab­lished so­cial­ist

mar­ket eco­nomic the­ory, fol­lowed by the erup­tion of the Asian fi­nan­cial cri­sis in 1997, the burst of dot­com bub­ble in 2001 and China’s ac­ces­sion into the WTO on De­cem­ber 11 in that year.

In the first 25 years af­ter 1978, China’s re­form and open­ing-up be­came so­phis­ti­cated. With great re­solve and con­fi­dence, China cre­ated a so­cial­ist mar­ket econ­omy with its own char­ac­ter­is­tics. The achieve­ments of re­form and open­ing-up are in­dis­putable. Af­ter 2003, China’s in­dus­trial and ur­ban de­vel­op­ment gained mo­men­tum. In 2011, China’s ur­ban­iza­tion rate ex­ceeded 50%. In 2012, China’s ser­vice sec­tor re­placed in­dus­try as a new growth en­gine. Amid this tran­si­tion, China shifted from rapid growth to medium-high growth, i.e. 9% on av­er­age dur­ing 2003-2018. Over the past four decades, China has led the world in terms of eco­nomic growth in var­i­ous stages.

As in­ter­na­tional com­par­i­son re­veals, China’s eco­nomic growth rate is more than dou­ble the level of ad­vanced economies and higher than those of emerg­ing East Asian coun­tries such as South Korea, Sin­ga­pore, Malaysia, In­done­sia, Thai­land and the Philip­pines by more than 30% (see Ta­ble 1). Fig­ure 1 com­pares China’s growth with other ma­jor world economies. While it still takes time for China to over­take the US econ­omy, China’s growth is much steeper and gaps are nar­row­ing. Af­ter the global fi­nan­cial cri­sis in 2008, China over­took Ja­pan as the world’s sec­ond largest econ­omy. Although In­dia’s growth rate over­took China’s in 2015, In­dia re­mains a medium-low in­come coun­try yet China is closer to the rank of high-in­come coun­tries.

1.2 China’s Re-Emer­gence Shapes the New Or­der of the World Econ­omy

From the found­ing of the Peo­ple’s Repub­lic of China in 1949 to re­form and open­ing-up in 1978, China ac­counted for less than 5% of world GDP, over 1/5 of world pop­u­la­tion with per capita GDP at less than one fourth of world av­er­age, and ex­port less than 1% of world’s to­tal. Back then, China was poor, pop­u­lous and largely iso­lated from the rest of the world. Yet today, China ac­counts for 18.82% of world pop­u­la­tion, 14.94% of world GDP and 13.2% of world to­tal ex­port. China’s per capita GDP is also get­ting close to world av­er­age. Rapid growth of China and other emerg­ing mar­ket economies has re­shaped the world econ­omy. In the post-cri­sis era, emerg­ing mar­ket economies over­took ad­vanced economies in terms of their share in world GDP. China and other BRIC coun­tries contributed over 30% and 60% of world GDP growth re­spec­tively.

China’s eco­nomic rise started since 1978, a year of un­prece­dented eco­nomic re­forms. Dif­fer­ent from

the for­mer USSR, China’s eco­nomic pol­icy was more rel­e­vant to its own re­al­i­ties and led to much bet­ter results. Ac­cord­ing to the WDI data­base, dur­ing 1978-2016, China’s GDP (in 2010 con­stant US dol­lar) grew by more than 30 times with pro­duc­tiv­ity up al­most 20 times and per capita real in­come up over 20 times - these achieve­ments were made pos­si­ble by ef­fi­ciency gains. For in­stance, farm­ers were given greater free­dom over crop se­lec­tion, which in­creased yield. High per­sonal sav­ings and FDI that turned into ma­te­rial cap­i­tal sup­ported in­dus­trial de­vel­op­ment. China’s en­try into the WTO in 2001 opened and fa­cil­i­tated trade. Mar­ket and com­pe­ti­tion in­creased China’s growth tenac­ity.

1.3 Tran­si­tion from Rapid yet Volatile Growth to More Sta­ble Medium-High Growth

The first 25 years since 1978 is char­ac­ter­ized by rapid yet volatile growth. In­fla­tion, China’s most im­por­tant macroe­co­nomic tar­get be­fore 1997, reached 9.3% in 1985, 18.8% in 1988, 18% in 1989,

14.7% in 1993, 24% in 1994 and 17.1% in 1995, fol­lowed by a re­duc­tion in 1997 and de­fla­tion dur­ing 1999-2001. Yet in the more re­cent 15 years, China’s con­sumer price in­dex (CPI) in­creased by more than 5% only in two years and was free from de­fla­tion. Mea­sured by volatil­ity vari­ance (square of dif­fer­ence be­tween an­nual value and mean value), price was 2.55 times more volatile in the first two decade than in the sec­ond two decades. Af­ter 2012, China’s eco­nomic growth stayed be­low the 8% tra­jec­tory and con­tin­ued to slide from 7.8%. As first men­tioned in the Report of the 19th CPC Na­tional Congress, China’s econ­omy has shifted from rapid growth to­ward “high-qual­ity de­vel­op­ment,” im­ply­ing that the gov­ern­ment is more tol­er­ant about slow­ing growth. In 2018, China’s growth rate is ex­pected to reach 6.5% or so, a shift from the rapid growth of 8-10% to medium-high growth range of 6-8%.

China’s in­creas­ing eco­nomic sta­bil­ity is re­flected as fol­lows: First, mi­cro-level en­ti­ties be­haved more ra­tio­nally and re­strained un­der mar­ket sys­tem; sec­ond, eco­nomic reg­u­la­tors were able to deal with com­plex sit­u­a­tions as reg­u­la­tory in­fra­struc­ture be­came more so­phis­ti­cated and past ex­pe­ri­ence of­fered lessons; third, in­sti­tu­tional re­forms caused smaller shocks to the econ­omy. Both the price re­form in 1988 and SOE re­form in 1998 se­ri­ously shocked China’s econ­omy. Grad­u­al­ist re­form that China cur­rently fol­lows, how­ever, is more so­phis­ti­cated and law-based with smaller im­pacts. Yet in­creas­ing eco­nomic open­ness has ex­posed China to ex­ter­nal shocks and po­ten­tial volatil­ity risks.

1.4 Literature Re­view

In­ter­na­tional schol­ars have ex­ten­sively dis­cussed China’s growth chal­lenges. Many schol­ars in­ves­ti­gated China’s growth ac­count­ing since re­form and open­ing-up in 1978 (Ren, 1995; Wang & Yao, 2001; Young, 2003; Holz, 2006; Zheng, Big­sten & Hu, 2006; Bos­worth & Collins, 2008; Perkins & Rawski, 2008; Holz, 2013a, 2013b). Ac­cord­ing to Young (2003), China’s ur­ban TFP growth was mod­er­ate dur­ing the first two decades of re­form (1978-1998) and la­bor deep­en­ing, in­clud­ing la­bor mi­gra­tion from agri-

cul­ture to ur­ban sec­tors, served as a key driver of liv­ing stan­dard im­prove­ment. It was not un­til the 1990s that peo­ple be­came aware of the con­tri­bu­tion of cap­i­tal deep­en­ing to China’s growth, as ev­i­denced in the surge of sav­ings and in­vest­ments. Later, some schol­ars paid fur­ther at­ten­tion to China’s in­ter-sec­toral growth ac­count­ing and ex­am­ined the con­tri­bu­tions of sec­tor TFP and in­ter-sec­toral re­source al­lo­ca­tion to growth. For in­stance, Brandt et al. (2008), Brandt & Zhu (2010) and Dekle & Van­den­broucke (2010, 2012) con­ducted a quan­ti­ta­tive anal­y­sis on China’s struc­tural tran­si­tion and sec­toral ac­count­ing af­ter 1978. Based on a three-sec­tor dy­namic model, Brandt & Zhu (2010) in­ves­ti­gated China’s growth sources and found that agri­cul­tural la­bor re­al­lo­ca­tion and cap­i­tal deep­en­ing had lim­ited growth ef­fects and may only in­crease TFP and serve as a key growth driver in the ur­ban non-state sec­tor of econ­omy.

China also has a se­ri­ous mis­match of cap­i­tal: As the state sec­tor ab­sorbed more than half of fixed in­vest­ments, im­prov­ing cap­i­tal al­lo­ca­tion will vastly pro­pel growth. Brandt et al. (2013) fur­ther ex­am­ined the spa­tial and sec­toral fac­tors of China’s econ­omy. Some other schol­ars dis­cussed China’s re­form ef­fi­ciency. Song et al. (2011) cre­ated a growth model en­com­pass­ing the char­ac­ter­is­tics of China’s eco­nomic tran­si­tion, in­clud­ing rapid growth, sus­tained re­turn to cap­i­tal, man­u­fac­tur­ing re­al­lo­ca­tion and large­sum trade sur­plus, to dis­cuss China’s fi­nan­cial fric­tions and fi­nanc­ing ef­fi­ciency. Based on a two-sec­tor growth model, Chere­mukhin et al. ex­plored China’s eco­nomic growth and struc­tural tran­si­tion dur­ing 1953-2012. They sys­tem­at­i­cally dis­cussed two stages be­fore re­form (1953-1978) and af­ter re­form (1978-present) with a con­sis­tent an­a­lyt­i­cal frame­work. With pre-re­form growth as bench­mark, they as­sessed China’s growth ef­fi­ciency af­ter re­form in 1978 and found that China’s GDP growth rate af­ter re­form and open­ing-up is 4.2 per­cent­age points higher com­pared with the sce­nario of pre-re­form growth pol­icy and model. Mean­while, agri­cul­tural work­force re­duced by 23.9%.

Some schol­ars in­ves­ti­gated the growth paths that may face China as it crossed the thresh­old of a medium-high in­come coun­try. For in­stance, Eichen­green et al. (2012) ex­am­ined when and un­der what cir­cum­stances will a fast-grow­ing econ­omy ex­pe­ri­ence a growth slow­down. Their study found that growth may slow when per capita in­come mea­sured by 2005 con­stant US dol­lar reaches 17,000 USD and fore­casted that China would soon reach this level in 2015. Growth may also slow for coun­tries with un­der­val­ued real ex­change rates and coun­tries with high de­pen­dency ra­tios and in­vest­ment rates. Eichen­green et al. (2014) fur­ther demon­strated that growth is more likely to slow within two in­come ranges of 10,000-11,000 USD and 15,000-16,000 USD rather than at spe­cific time points. In their tran­si­tion to­wards high-in­come stage, most fast-grow­ing economies ex­pe­ri­enced two rounds of de­cel­er­a­tion. It was also noted that growth rarely slowed for coun­tries with a well-ed­u­cated pop­u­la­tion and sig­nif­i­cant high­tech ex­port. As a fast-grow­ing econ­omy ad­vances to a higher level, it must strive to fos­ter skilled work­force or hu­man cap­i­tal and move up the value chain to avoid fall­ing into the “mid­dle in­come trap”. ADB (2012) also stressed that China’s econ­omy has been dom­i­nated by low-value tra­di­tional in­dus­tries due to back­ward modern ser­vice sec­tor and that hu­man cap­i­tal plays a piv­otal role in trans­form­ing growth pat­tern.

Chi­nese schol­ars ex­ten­sively dis­cussed China’s growth is­sues. Based on the study of the struc­tural ac­cel­er­a­tion dur­ing China’s in­dus­tri­al­iza­tion and the struc­tural de­cel­er­a­tion for ser­vice-based econ­omy, China Eco­nomic Growth Fron­tier Re­search Group iden­ti­fied the di­rec­tion of struc­tural change in the mid­dle-in­come stage as an im­por­tant area of re­search: Struc­tural slow­down will oc­cur if struc­tural change has led to in­ef­fi­ciency and re­duced TFP con­tri­bu­tion, thus pre­vent­ing a coun­try from cross­ing mid­dle-in­come stage. China’s struc­tural de­cel­er­a­tion and ef­fi­ciency shocks have also been dis­cussed in de­tail (Re­search Group, 2013-2014). Based on in­ter­na­tional com­par­i­son, Zhang (2015) ar­gued that China should tran­si­tion into a ser­vice-based econ­omy. Since struc­tural dis­tor­tion is the fun­da­men­tal fac­tor of a coun­try’s ex­ter­nal and in­ter­nal in­sta­bil­ity, struc­tural tran­si­tion is cru­cial to mid­dle-in­come coun­tries.

Some other schol­ars dis­cussed whether China will fall into the mid­dle-in­come trap. From a risk con­trol per­spec­tive, Yao (2015) be­lieved that the key in avoid­ing the mid­dle-in­come trap is to pre­vent mone-

tary, debt and bank­ing crises. Zhang (2015) noted that China must re­form gov­ern­ment in­ter­ven­tion, pre­vent ex­ter­nal fi­nan­cial shocks, and pro­mote in­no­va­tion and eco­nomic sta­bil­ity. Zhang (2013) dis­cov­ered that in­sti­tu­tions and orig­i­nal tech­nol­ogy progress are par­tic­u­larly im­por­tant for mid­dle-in­come coun­tries. Ac­cord­ing to Li (2013), 90% of China’s eco­nomic de­cel­er­a­tion is due to TFP re­duc­tion and 10% is due to in­suf­fi­cient cap­i­tal ac­cu­mu­la­tion. Li et al. (2015) con­sid­ered that in­dige­nous in­no­va­tion and hu­man cap­i­tal con­trib­ute pos­i­tively to growth sta­bil­ity. Jin and Tao (2015) con­ducted an em­pir­i­cal anal­y­sis on China’s growth mo­men­tum in dif­fer­ent stages in light of pro­duc­tion, struc­tural and in­sti­tu­tional fac­tors.

Schol­ars come to re­al­ize the im­por­tance of in­no­va­tion and ef­fi­ciency for China to over­come growth trap in its cur­rent stage of de­vel­op­ment. Cai (2011, 2013) stressed that China must over­come the growth bot­tle­necks of di­min­ish­ing de­mo­graphic div­i­dends and the “Lewis turn­ing point” in its tran­si­tion from dual econ­omy to neo­clas­si­cal growth stage. Pol­icy ad­just­ments must be lever­aged to re­al­lo­cate re­sources, pro­mote hu­man cap­i­tal, tech­nol­ogy progress and in­sti­tu­tional and ef­fi­ciency im­prove­ments, and tran­si­tion to­wards TFP-sup­ported growth. Other schol­ars also stressed the im­por­tance for China to de­velop hu­man cap­i­tal (Yao, 2013; Wu, 2014; Zhang et al., 2014). Yao (2014) be­lieved that in the mid­dle-in­come stage, China still has gaps in the qual­ity of its en­ter­prises, orig­i­nal­ity in sci­en­tific re­search and com­pet­i­tive­ness of tra­di­tional in­dus­tries. Re­search Group (2015) high­lighted the im­por­tant role of in­no­va­tion fac­tor sup­ply in over­com­ing growth de­cel­er­a­tion. The study noted that as cap­i­tal-driven growth mo­men­tum lost steam, the sup­ply of new fac­tors, par­tic­u­larly knowl­edge sec­tor, holds the key to tran­scend­ing growth. Yuan et al. (2016) fur­ther in­di­cated that bal­anced in­dus­trial and ser­vice sec­tor de­vel­op­ment is es­sen­tial for China to tran­scend the mid­dle in­come stage by re­shap­ing ef­fi­ciency model based on knowl­edge and hu­man cap­i­tal fac­tors through in­sti­tu­tional re­form.

2. Cross­ing Growth Stage through In­sti­tu­tional Tran­si­tion

In 1978, China’s per capita in­come1 was only 200 USD. Ac­cord­ing to the lat­est World Bank stan­dard for the clas­si­fi­ca­tion of growth stages2, China was a low-in­come coun­try in 1978 (per capita in­come<1,045 USD) and by 2016, China’s per capita in­come reached 8,260 USD, a suc­cess­ful leap into medium-high in­come stage (4,105 USD < per capita in­come < 12,735 USD). By 2023-2025, China is ex­pected to be­come a high-in­come coun­try with per capita in­come above 12,735 USD. In­sti­tu­tional re­form lies at the heart of China’s phe­nom­e­nal growth over the past four decades of trans­for­ma­tion from a planned econ­omy into a mar­ket-based one. This shift brought China from the verge of col­lapse to be­ing the world’s sec­ond largest econ­omy.

China’s eco­nomic re­form has fol­lowed a grad­u­al­ist ap­proach. Af­ter smash­ing the “Gang of Four” in 1976, China started to “dis­pel chaos and re­store peace” and then ini­ti­ated the re­form and open­ing-up pro­gram in the late 1970s. Re­form started from the coun­try­side. The Sev­eral Mat­ters con­cern­ing the Fur­ther Im­prove­ment of Agri­cul­tural Pro­duc­tion Re­spon­si­bil­ity Sys­tem is­sued by the CPC Cen­tral Com­mit­tee in Septem­ber 1980 al­lows farm­ers to im­ple­ment a two-year con­tract re­spon­si­bil­ity sys­tem, which breathed new vi­tal­ity to agri­cul­ture. Town­ship and vil­lage en­ter­prises with ru­ral col­lec­tive own­er­ship also de­vel­oped rapidly. Soon af­ter ru­ral re­form, most schol­ars and lead­ers in charge of

eco­nomic work agreed that re­form and de­vel­op­ment must in­crease the au­ton­omy of en­ter­prise op­er­a­tion and vi­tal­ity. In­spired by for­mer Yu­goslavia’s “au­ton­o­mous en­ter­prises” sys­tem, some schol­ars put for­ward mi­cro-re­form the­o­ries. The prov­ince of Sichuan car­ried out the re­form to “in­crease en­ter­prise au­ton­omy” and Cap­i­tal Steel played an ex­em­plary role in con­tract sys­tem. Other en­ter­prises also fol­lowed suit with great en­thu­si­asm. How­ever, the lim­i­ta­tions of this prac­tice later be­came ap­par­ent, as re­flected in the un­even and im­bal­anced eco­nomic de­vel­op­ment.

In­sti­tu­tional in­cre­men­tal re­forms were rolled out on the ba­sis of suc­cess­ful ru­ral re­form. On Oc­to­ber 20, 1984, the Third Plenum of the 12th CPC Cen­tral Com­mit­tee adopted the De­ci­sions on Eco­nomic In­sti­tu­tional Re­form to “re­form the en­tire eco­nomic sys­tem with cities as pri­or­ity” and “de­velop so­cial­ist com­mod­ity econ­omy”, “cre­ate a rea­son­able price sys­tem”, “in­vig­o­rate en­ter­prises and par­tic­u­larly large and medium-sized en­ter­prises owned by the whole peo­ple”, and “proac­tively de­velop var­i­ous eco­nomic forms and op­er­a­tion modes”. This doc­u­ment marks the in­cep­tion of China’s eco­nomic in­sti­tu­tional re­form to “fos­ter mar­ket mech­a­nisms out­side the sys­tem”.

Since 1992, China has en­tered into a pe­riod of co­or­di­nated re­forms. In Oc­to­ber 1992, the 14th CPC Na­tional Congress es­tab­lished the re­form ob­jec­tive to cre­ate a so­cial­ist mar­ket eco­nomic sys­tem. Adopted by the Third Plenum of the 14th CPC Cen­tral Com­mit­tee in 1993, the De­ci­sions on Cre­at­ing So­cial­ist Mar­ket Eco­nomic Sys­tem noted that “over­all re­form must go hand in hand with break­throughs in pri­or­ity ar­eas” and that the goal is to ini­tially cre­ate a so­cial­ist mar­ket eco­nomic sys­tem by the end of the 20th cen­tury.

The pre­vi­ous ad­min­is­tra­tive con­tract sys­tem was re­formed into a “tax-shar­ing sys­tem” (in­clud­ing pro­vin­cial and county gov­ern­ments). In ad­di­tion, China es­tab­lished a cen­tral bank sys­tem with inde-

于低收入国家(人均收入<1045美元),而至2016年中国人均收入已达到8260美元,成功实现了向中等偏高收入阶段(4125美元<人均收入<12735美元)的跨越,以现在经济增长速度推算,预计2023~ 2025年就能成功突破12735美元进入高收入国家行列,届时,中国经济将进入到高收入发展阶段。




pen­dent mon­e­tary pol­icy un­der cen­tral gov­ern­ment lead­er­ship. Ex­ist­ing banks were com­mer­cial­ized and pol­icy banks were cre­ated to un­der­take pol­icy tasks. In 1995, the Na­tional Peo­ple’s Congress adopted the Bank­ing Law. China fur­ther set a goal to “trans­form SOE op­er­a­tion and cre­ate a modern en­ter­prise sys­tem com­pat­i­ble with mar­ket econ­omy with ex­plicit own­er­ship, clear rights and re­spon­si­bil­i­ties, in­de­pen­dent op­er­a­tion and science-based man­age­ment”, which is writ­ten into the Com­pany Law en­acted by the Na­tional Peo­ple’s Congress, China’s leg­is­la­ture. So­cial­ist mar­ket eco­nomic sys­tem be­came es­tab­lished and in­cor­po­rated into the le­gal sys­tem. In 1997, the 15th CPC Na­tional Congress made an­other his­toric break­through by adopt­ing the fol­low­ing prin­ci­ples: (1) re­duce the scope of the state sec­tor of econ­omy and grad­u­ally with­draw state cap­i­tal from non-crit­i­cal sec­tors; (2) iden­tify var­i­ous forms of pub­lic own­er­ship to pro­mote pro­duc­tiv­ity; (3) en­cour­age in­di­vid­ual busi­nesses, pri­vate busi­nesses and other forms of non-pub­lic econ­omy as im­por­tant el­e­ments of so­cial­ist mar­ket econ­omy.

Start­ing from own­er­ship re­struc­tur­ing, China’s grad­u­al­ist re­form in­cluded the fol­low­ing el­e­ments: de­vel­op­ing non-pub­lic econ­omy, re­struc­tur­ing “dou­ble track” eco­nomic sys­tem, re­form­ing macroe­co­nomic reg­u­la­tory frame­work with link­age be­tween pub­lic fi­nance and tax­a­tion, and mak­ing greater ef­forts to pro­pel SOE re­form. Af­ter the dawn of the 21st cen­tury and par­tic­u­larly the 16th CPC Na­tional Congress in 2002, the re­form fo­cused on im­prov­ing mar­ket eco­nomic sys­tem, so­cial se­cu­rity, in­come dis­tri­bu­tion and en­vi­ron­men­tal pro­tec­tion. In 2017, the Report of the 19th CPC Na­tional Congress stressed that the prin­ci­pal con­tra­dic­tion fac­ing Chi­nese so­ci­ety is the “con­tra­dic­tion be­tween im­bal­anced and in­ad­e­quate de­vel­op­ment and the peo­ple’s ever-grow­ing needs for a bet­ter life”. This means that eco­nomic de­vel­op­ment will con­tinue to take cen­ter stage in China’s po­lit­i­cal and eco­nomic re­forms in the com­ing five years - a con­tin­u­a­tion of the pol­icy key­note to pri­or­i­tize eco­nomic de­vel­op­ment since re­form and open­ing-up. Yet the Report of the 19th CPC Na­tional Congress also at­tached un­prece­dented im­por­tance to re­dis­tri­bu­tion. It calls for lift­ing all ru­ral poor peo­ple out of poverty by 2020, a ma­jor vic­tory in re­solv­ing the con­tra­dic­tion of im­bal­anced de­vel­op­ment. Grad­u­al­ist ap­proach of re­form, sup­ported by both the­ory and prac­tice, re­quires step-by-step re­forms car­ried out with pilot pro­grams in sync with open­ing-up. Stud­ies on this ap­proach sparked ex­ten­sive dis­cus­sions on the “Big Bang” vs. “grad­u­al­ist re­form” .

To date, China’s eco­nomic re­form can be di­vided into the fol­low­ing stages:

(1) Stage I: in­cep­tion of eco­nomic re­form from the coun­try­side based on ru­ral con­tract re­spon­si­bil­ity sys­tem (from the Third Plenum of the 11th CPC Cen­tral Com­mit­tee in 1978 to the Third Plenum of the 12th CPC Cen­tral Com­mit­tee in Oc­to­ber 1984);

(2) Stage II: eco­nomic re­forms in full swing to in­vig­o­rate ur­ban en­ter­prises with price re­form as

th a key as­pect of re­form (from Oc­to­ber 1984 to the 14 CPC Na­tional Congress in 1992);

(3) Stage III: ini­tial cre­ation of so­cial­ist mar­ket eco­nomic sys­tem (from 14th CPC Na­tional Congress in 1992 to the 16th CPC Na­tional Congress in 2001) char­ac­ter­ized by macroe­co­nomic re­form ini­tia­tives in 1994, re­form of ba­sic sys­tems dur­ing 1997-1999, own­er­ship re­struc­tur­ing, as well as all-round open­ing-up since the WTO en­try in 2001;

( 4) Stage IV ( 2002- 2012): im­prove­ment of so­cial­ist mar­ket eco­nomic sys­tem, in­clud­ing the re­form of ex­change rate regime in July 2005 from a fixed ex­change rate regime to a man­aged float­ing ex­change rate regime. On Jan­uary 1, 2006, China re­scinded the four agri­cul­tural taxes that had ex­isted for over a mil­len­nium (in­clud­ing agri­cul­tural tax, an­i­mal slaugh­ter tax, live­stock tax and tax on agri­cul­tural and forestry spe­cial­ties) and de­vel­oped ru­ral so­cial se­cu­rity, cre­ated a new ru­ral co­op­er­a­tive so­cial se­cu­rity sys­tem, and car­ried out en­ergy con­ser­va­tion and emis­sion abate­ment on all fronts. In the af­ter­math of the global fi­nan­cial cri­sis that erupted in 2008, the Chi­nese gov­ern­ment adopted a proac­tive fis­cal pol­icy with a 4-tril­lion-yuan stim­u­lus and in­vested heav­ily in in­fra­struc­ture and ur­ban de­vel­op­ment in sync with fi­nan­cial in­no­va­tion. Var­i­ous forms of fi­nan­cial in­no­va­tion that emerged were re­lated to fi­nanc­ing for ur­ban­iza­tion. Surg­ing hous­ing prices be­came a new prob­lem of





迄今为止,中国经济体制改革过程可划分为五个阶段:①第一阶段:从农村开始的经济体制改革起步阶段(1978年十一届三中全会至1984年10月十二届三中全会),主要改革举措是农村联产承包责任制。②第二阶段:以城市为重点的整个经济体制改革的全面展开阶段(1984年10月至1992年十四大),改革的中心环节是增进企业活力,改革的关键是价格体系的改革。③第三阶段:初步建立社会主义市场经济体制阶段(1992年中共十四大至2001年中共十六大),1994年宏观五项整体配套改革取得突破性进展,1997~ 1999年进行基本制度改革,调整所有制结构,全面对外开放,2001年加入W TO。④第四阶段(2001~ 2012年)完善社会主义市场经济体制阶段,采取了一系列改革和发展的举措,2005年7月国家进行了汇率制度的改革,从固定汇率向有管理的浮


(5) Stage V (2013-present): As China en­tered into the new nor­mal and sup­ply-side struc­tural re­forms steadily ad­vanced, the five de­vel­op­ment con­cepts, i. e. in­no­va­tion, co­or­di­na­tion, green de­vel­op­ment, open­ness and shar­ing, be­came over­ar­ch­ing themes of this stage. This stage is char­ac­ter­ized by the fol­low­ing pri­or­i­ties: the goal to build a mod­er­ately pros­per­ous so­ci­ety in all re­spects, the Belt and Road Ini­tia­tive, the com­mu­nity of shared des­tiny for mankind, the need to sup­port bal­anced glob­al­iza­tion, and the prin­ci­ple of “seek­ing steady progress” un­der macroe­co­nomic reg­u­la­tory frame­work.

China’s eco­nomic growth is ac­com­pa­nied by its tran­si­tion from an agri­cul­tural coun­try into an ur­ban and mod­ern­ized coun­try, which can be di­vided into the fol­low­ing stages: Stage I ru­ral eco­nomic de­vel­op­ment (1978-1991); Stage II in­dus­tri­al­iza­tion and ru­ral la­bor mi­gra­tion in the con­text of open­ing-up (1992-2002); Stage III in­creas­ing ur­ban­iza­tion. By 2018, China’s ur­ban pop­u­la­tion is ex­pected to reach 59% and ser­vice sec­tor will be­come a dom­i­nant in­dus­try. In 2015, the share of ser­vice sec­tor in GDP ex­ceeded 50%. The trend of China’s ser­vice-based econ­omy shows that China has suc­cess­fully crossed in­dus­tri­al­iza­tion stage from a typ­i­cal agri­cul­tural coun­try (in 1978, China’s ru­ral pop­u­la­tion ac­counted for 82.1%) and be­come a modern so­ci­ety whe re ur­ban econ­omy holds sway.

For a back­ward coun­try, pur­su­ing in­dus­tri­al­iza­tion could be a choice of des­tiny. From the day when China’s doors were forced open by the Western pow­ers, Chi­nese vi­sion­ar­ies as­pired to turn China into a strong coun­try through in­dus­trial de­vel­op­ment. For any late-mov­ing coun­try, in­dus­tri­al­iza­tion, in the high­est form of heavy and chem­i­cal in­dus­tries, is a goal to be pur­sued. Be­fore 1978, China’s heavy in­dus­tri­al­iza­tion in­evitably led to neg­a­tive con­se­quences un­der a highly cen­tral­ized planned econ­omy. This part of his­tory was fraught with volatil­ity, stag­nant liv­ing stan­dards and se­ri­ously dis­torted eco­nomic struc­ture. Af­ter rapid growth in the 1950s and 1960s, China’s econ­omy was trapped in se­ri­ous stag­na­tion in the mid-1960s and the late 1970s and was on the verge of col­lapse. Tra­di­tional pat­tern of re­source al­lo­ca­tion un­der the planned eco nomy, which fet­tered eco­nomic growth, was re­placed by a new pat­tern of eco­nomic growth af­ter re­form.

China’s re­forms also started at the mi­cro- level. Both en­ter­prises and farm­ers all wel­comed ma­te­rial in­cen­tives and con­tract sys­tems as re­form ini­tia­tives. The prin­ci­ple of in­dus­trial re­struc­tur­ing was adopted to balance re­form with ad­just­ment. The suc­cess of ru­ral re­form paved the way for fu­ture re­forms and was fol­lowed by own­er­ship re­struc­tur­ing and fac­tor al­lo­ca­tion re­form. Since the “Bashan Ship Meet­ing” in 1988, Chi­nese schol­ars drew upon the lessons of Eastern Europe’s tra­di­tional so­cial­ist eco­nomic sys­tem, such as Janos Kor­nai’s con­cept of “short­age econ­omy”. More im­por­tantly, they put for­ward a tar­get model of re­form, i.e. IIB model, char­ac­ter­ized by mar­ket co­or­di­na­tion with cen­tral plan­ning. The con­cept of mar­ket econ­omy ush­ered in great progress of re­form strate­gies and re­source al­lo­ca­tion modes.

The key to all eco­nomic ques­tions lies in how to in­crease the ef­fi­ciency of re­source al­lo­ca­tion and uti­liza­tion. To our knowl­edge, mar­ket re­mains the most ef­fec­tive means of re­source al­lo­ca­tion. For a broad range of com­pet­i­tive sec­tors, mar­ket mech­a­nism di­verts the flow of re­sources from in­ef­fi­cient sec­tors to more ef­fi­cient sec­tors. It may also im­prove ef­fi­ciency for sec­tors of nat­u­ral mo­nop­oly that pro­vide im­por­tant pub­lic goods. This is how mar­ket econ­omy de­rives its vi­tal­ity and why the tran­si­tion from planned econ­omy into a mar­ket-based one is nece ssary.

China’s eco­nomic the­o­ries could not have made these de­vel­op­ments with­out po­lit­i­cal wis­dom. In 1979, Deng Xiaop­ing ar­gued that so­cial­ism is not at odds with mar­ket econ­omy. In 1984, the Third Plenum of the 12th CPC Cen­tral Com­mit­tee made the state­ment that so­cial­ist econ­omy is a “com­mod­ity econ­omy with cen­tral plan­ning un­der pub­lic own­er­ship,” a de­ci­sion that was praised by Deng Xiaop­ing as an in­ven­tion of “po­lit­i­cal eco­nomics that com­bines ba­sic Marx­ist prin­ci­ples with China’s so­cial­ist prac­tice”. In early 1992, Deng Xiaop­ing fur­ther pointed out that “A planned econ­omy is not equiv­a­lent to so­cial­ism, there is plan­ning un­der cap­i­tal­ism too; a mar­ket econ­omy is not cap­i­tal­ism,

动汇率进行改革转型;2006年1月1日,中国完全取消了农业四税(农业税、屠宰税、牧业税、农林特产税),在中国延续了千年的农业税消失,并积极推进农村的社保建设,建立新农合社会保障体系,全面开展节能减排等; 2008年全球金融危机爆发,中国从2009年起进入到了一个反全球金融危机期,国家启动了四万亿的积极财政政策,并配合金融创新,积极为城市化的基础设施和城市化建设进行投资,这期间出现各类金融创新与城市化融资有关,房地产价格快速攀升凸显出城市化阶段的新问题。⑤第五阶段(2012年至今),中国进入新常态,供给侧结构改革积极推进,五大发展理念,即创新、协调、绿色、开放、共享成为这一发展阶段的统领,以全面建设小康为目标,同时对外开放提出了“一带一路”倡议,人类命运共同体,并在逆全球化中高举全球化大旗,推进全球化的平衡发展,在宏观管理框架下提出了“稳中求进”,这些都是新阶段、新起点的系列总结和开创,也是这一阶段发展的客观性表述。

中国经济增长的主线可以更清晰地总结为农业国向现代化国家的转变,即体现出来的是农业——工业化——城市化,围绕的是农业人口的生产率提高——农村劳动力转移和工业化——城市化率提高进入现代化的过程。这一发展的主线表现在:第一阶段是农村经济带动(1978~1991年);第二阶段是国际化阶段带动工业化和农村劳动力大转移阶段(1992~2002年);第三阶段是城市化的提高,即城市人口比率提高,预计2018年中国城市人口占比将达到59%,服务业成为了城市经济的主导性产业,服务业占G D P比重2015年超过了50%,中国经济结构服务化趋势特征表明,中国经济社会从典型的农业国(1978年农村人口占比为82.1%)跨越工业化,进入到了以城市经济为推动力的现代社会国家。


中国在改革的探索阶段也是从微观的实践起步的。改革能激活微观经济主体的活力,不论企业还是农民,都希望通过“物质刺激”、“承包制”等激励性工具进行改革。同时,提出了调整产业结构的方针,把改革与调整相协调,经过了改革的起步阶段,农村改革的成功将改革引向了深化,所有制结构调整,整体要素配置体系改革观念也逐步引入。从1988年“巴山轮”开始,中国的学者又将东欧的对传统社会主义经济体制反思理论引入,如科尔内的“短缺经济”概念,更为重要的是提出了改革的目标模式,即所谓I I B模式,也就是有计划的市场协调,改革战略和资源配置模式因市场经济的概念引入而得到了空前发展。


there are mar­kets un­der so­cial­ism too”. In 1992, the 14th CPC Na­tional Congress de­fined so­cial­ist mar­ket eco­nomic sys­tem as the tar­get model of re­form. In 2013, the Third Plenum of the 18th CPC Cen­tral Com­mit­tee reaf­firmed the “de­ci­sive role of mar­ket econ­omy”, which was fol­lowed by im­prov­ing le­gal sys­tem com­pat­i­ble with mar­ket econ­omy. In Oc­to­ber 2017, the Report of the 19th CPC Na­tional Congress called for “im­prov­ing so­cial­ist mar­ket eco­nomic sys­tem” and en­sur­ing free flow of fac­tors, flex­i­ble price re­sponse and a level play­ing field for en­ter­prises.

China has de­vel­oped its own growth model. Yet this model still fea­tures strong gov­ern­ment in­ter­ven­tions as part of its catch-up strat­egy. Given di­min­ish­ing re­turn to fac­tor in­put and in­suf­fi­cient TFP con­tri­bu­tion, how to re­shape growth model and in­crease ef­fi­ciency re­mains a strate­gic ques­tion. While pro­long­ing its catch- up pe­riod, China should pur­sue a sta­ble tran­si­tion for sus­tain­able de­vel­op­ment.

3. Mod­ern­iza­tion of China’s Eco­nomic Struc­ture

Un­der the planned econ­omy, overem­pha­sis on heavy in­dus­tries caused se­ri­ous struc­tural dis­tor­tions, which were cor­rected through in­sti­tu­tional re­form to en­sure mar­ket-based re­source al­lo­ca­tion. The re­form opened China’s sec­ond round of in­dus­tri­al­iza­tion. With ris­ing per capita GDP and house­hold con­sump­tion and fall­ing En­gel co­ef­fi­cient, the share of pri­mary in­dus­try con­tin­u­ously de­creased and in­dus­tri­al­iza­tion led by man­u­fac­tur­ing gained mo­men­tum. Ur­ban em­ploy­ment be­came the dom­i­nant form of em­ploy­ment. A new chap­ter of eco­nomic and so­cial mod­ern­iza­tion was un­veiled. The shares of pri­mary in­dus­try in to­tal out­put value and em­ploy­ment dropped from 28.2% and 70.5% in 1978 to 11.3% and 40.8% re­spec­tively in 2007. In 2007, agri­cul­ture, in­dus­try and ser­vice sec­tor contributed 3.6%, 54.1% and 42.3% to China’s growth re­spec­tively. In ad­di­tion, China ranks the first in the world in terms of the out­put of iron and steel, coal, ce­ment, chem­i­cal fer­til­izer, chem­i­cal fiber, cot­ton cloth and durable con­sumer goods, the sec­ond in terms of power gen­er­a­tion and the sixth in terms of crude oil pro­duc­tion. China leads the world in man­u­fac­tur­ing many high-tech prod­ucts such as elec­tron­ics.

In the wake of the global fi­nan­cial cri­sis that erupted in 2008, China took res­o­lute counter-cri­sis mea­sures and in­creased in­fra­struc­ture in­vest­ment, which boosted ur­ban­iza­tion. In 2011, China’s ur­ban­iza­tion rate ex­ceeded 50%. In 2015, agri­cul­ture, man­u­fac­tur­ing and con­struc­tion sec­tors ac­counted for 5%, 27% and 8% re­spec­tively of to­tal em­ploy­ment; the share of ser­vice sec­tor in China’s em­ploy­ment reached 59%. Ob­vi­ously, ur­ban and ser­vice sec­tors be­came dom­i­nant sec­tors. By 2018, China’s ur­ban­iza­tion rate is ex­pected to ap­proach or ex­ceed 60%. In the fu­ture, China’s ur­ban­iza­tion growth will slow and sta­bi­lize. Yet such growth will be driven by ur­ban fer­til­ity rate, life ex­pectancy and nat­u­ral pop­u­la­tion growth, higher than in the coun­try­side, in­stead of con­tin­ued la­bor mi­gra­tion. The past four decades of re­form and open­ing-up have wit­nessed China’s tran­si­tion from agri­cul­ture to in­dus­try and then to ur­ban econ­omy and an in­creas­ingly so­phis­ti­cated modern ser­vice-based econ­omy.

The evo­lu­tion of China’s in­dus­trial struc­ture fol­lowed a clear path. China’s first round of in­dus­tri­al­iza­tion was sup­ported by the for­mer USSR through 158 in­dus­trial projects. Ru­ral sur­plus pro­duc­tion was ex­tracted through price scissors and ur­ban con­sump­tion was min­i­mized to save re­sources to de­velop heavy in­dus­try. The econ­omy de­vel­oped by boom and bust. Heavy and chem­i­cal in­dus­tri­al­iza­tion came to a halt. Af­ter re­form and open­ing-up in 1978, China launched its sec­ond round of more bal­anced in­dus­tri­al­iza­tion and rec­og­nized non-pub­lic econ­omy. From a dis­torted in­dus­trial sys­tem, China has trans­formed into the largest man­u­fac­turer in the world. With ur­ban­iza­tion rate above 50%, China is transitioning to­wards a ser­vice-based econ­omy. In 2015, ser­vice sec­tor ac­counted for more than 50% of China’s econ­omy and 59% of la­bor em­ploy­ment.

For ad­vanced economies, their ser­vice sec­tors will con­tinue to grow pro­por­tion­ally. For Ger­many and Ja­pan, for in­stance, their ser­vice sec­tors sta­bi­lize at 70% of econ­omy, while this ra­tio is 80% for some other ad­vanced economies. Ser­vice sec­tor ac­counts for less than 60% of South Korea’s econ­omy





按市场方式配置资源的体制改革很快激励了中国均衡结构的发展,矫正了传统计划经济片面发展重工业造成的严重结构畸形,开始了中国的第二次工业化。工业化的主要特征就是随着人均G D P的增长,居民消费提高,恩格尔系数持续下降引致第一产业持续下降,以制造业为代表的工业化开始发展,非农就业成为了社会最主要的就业方式,取代了传统的农业社会就业方式,经济社会进入现代化进程。改革开放以来,第一产业产值和就业量占比从28.2%和 70.5%分别下降到了2007年的11.3%和40.8%。2007年农业对中国经济增长的贡献仅有3.6%,工业贡献为54.1%,服务业贡献为42.3%。中国工业化不仅表现在对经济的贡献,而且更体现了它强大的生产规模,钢铁、煤炭、水泥、化肥、化纤、棉布、耐用消费品等产品产量位居全球第一,而发电量位居全球第二、原油位居全球第六等,近年在电子等高技术行业发展迅速,很多单项的产能也是全球之冠。

2008年全球金融危机爆发,中国2009年果断采取了反危机措施,加大了基础设施的投资,城市化高歌猛进,到2011城市化率突破50%,2012年服务业占G D P的比重突破50%。2015年从劳动力就业的行业分布看,农业劳动力只有5%,工业部门中的制造业占比为27%,建筑业占比为8%;中国服务业占比为59%,中国经济结构呈现出城市主导和经济结构服务化的趋势。预计2018年城市化率将接近或突破60%,中国未来城市化率逐步进入稳定增长阶段,不是靠农村居民快速城市化,而是因城市出生率高、预期寿命长、人口自然增长高于农村,而农村老龄化和死亡率程度高于城市,主导城市化的因素从人口转移转向人口自然增长阶段,城市化的高速增长期逐步变缓。改革开放近40年,中国成功跨越了三个阶段,农业主导到工业化主导,再到城市经济主导,经济结构服务化,现代经济体逐步成熟。

and this ra­tio is also low for other East Asian economies where man­u­fac­tur­ing sec­tors hold sway. Hence, it is not nec­es­sary for China to ex­pand its ser­vice sec­tor too much. In fact, China’s fi­nan­cial ser­vices as a share in its ser­vice sec­tor are the high­est in the world and de­vi­ate from its cur­rent stage of de­vel­op­ment. Tra­di­tional sec­tors re­main growth en­gines even if China strives for high-qual­ity growth. With­out clear­ing re­dun­dan­cies or in­tro­duc­ing com­pe­ti­tion, it is likely for China to face se­ri­ous risks of slow­down. China’s other ser­vice sec­tors, such as sci­en­tific re­search, ed­u­ca­tion, cul­ture, health and sports, are run by gov­ern­ment agen­cies. In this sense, ser­vice sec­tor is un­der­es­ti­mated to some ex­tent and ser­vice sec­tor re­struc­tur­ing is an im­por­tant part of re­form in the next stage.

From the sup­ply side per­spec­tive, China’s econ­omy ex­pe­ri­enced the fol­low­ing changes in the past four decades: (1) Ter­tiary in­dus­try re­placed se­condary in­dus­try as a key growth driver, con­tribut­ing 53.7% of growth in 2015. (2) In­dus­try contributed more per­cent­age points to growth than that of ser­vice sec­tor in the first three decades af­ter re­form and open­ing-up, which was re­versed only in the re­cent decade. Yet in the first 25 years, man­u­fac­tur­ing sec­tor served as a de­ci­sive con­trib­u­tor to growth and ranked the sec­ond in the fol­low­ing 15 years. (3) The trend of ser­vice-based econ­omy is gain­ing mo­men­tum.

From de­mand side, the changes in­clude: (1) Ex­port con­tri­bu­tion played a de­ci­sive role dur­ing 19952008, when China uti­lized its com­par­a­tive ad­van­tage to achieve rapid growth and af­ter 2009, China shifted to­wards do­mes­tic con­sump­tion and contributed to global re­cov­ery. (2) China’s de­mand struc­ture be­came more bal­anced with con­sump­tion con­tribut­ing 59.9% in 2015, which is a re­ver­sal of dis­torted in­vest­ment that contributed to 67.8% at the in­cep­tion of re­form and open­ing-up. As China’s econ­omy sta­bi­lized, its de­mand struc­ture also be­came more bal­anced.




In­dus­tri­al­iza­tion pro­pelled ur­ban­iza­tion by at­tract­ing sur­plus ru­ral la­bor to modern sec­tors. In­dus­trial de­vel­op­ment within cities and in the vicin­ity of cities spawned ur­ban de­vel­op­ment zones and in­dus­trial parks. Ur­ban­iza­tion picked up speed as farm­ers turned into ur­ban­ites. As in­dus­trial growth sta­bi­lized or de­clined, fu­ture ur­ban­iza­tion growth will be driven by an uptick in ur­ban em­ploy­ment, which holds the key to fu­ture de­vel­op­ment, in the con­text of ser­vice-based econ­omy. In­dus­tri­al­iza­tion pro­pels ur­ban de­vel­op­ment, which de­ter­mines a coun­try’s eco­nomic mod­ern­iza­tion re­flected in hu­man de­vel­op­ment.

4. Im­prove­ment of China’s Eco­nomic Growth Qual­ity and Re­shap­ing of Ef­fi­ciency Model

Af­ter four decades of re­form and open­ing-up, China has en­tered into a medium-high in­come stage and is ex­pected to join the ranks of high-in­come coun­tries by 2025. China’s growth model has also shift-


从需求结构看中国经济近40年的变化:①出口贡献在中国快速发展的1995~ 2008年起到了决定性的作用,利用了比较优势,中国经济增长高速发展,2009年后中国经济逐步转向内需,并对全球经济复苏起到带动作用;②中国需求结构逐步均衡,2015年消费贡献达到59.9%,也校正了改革开放之初的投资贡献高达67.8%的畸形投资,经济逐步平稳,需求结构逐步均衡。


ed from late-mov­ing catch-up to medium- and high-end de­vel­op­ment. As en­vi­sioned by CPC Cen­tral Com­mit­tee Gen­eral Sec­re­tary Xi Jin­ping, China will “ba­si­cally achieve so­cial­ist mod­ern­iza­tion” dur­ing 2020-2035. There­after, China will build up its wealth and power and es­tab­lish its po­si­tion as a modern so­cial­ist power dur­ing 2035-2050. As shown by growth the­o­ries and in­ter­na­tional ex­pe­ri­ence, growth qual­ity hinges upon pro­duc­tiv­ity and TFP con­tri­bu­tion. Quan­ti­ta­tive ex­pan­sion and dis­e­qui­lib­rium in the pre­vi­ous catch-up stage must give way to “in­no­va­tive, bal­anced, green, de­vel­op­ment and shared eco­nomic growth” in the new stage.

China must strive to im­prove pro­duc­tiv­ity, which de­ter­mines wage growth, and TFP con­tri­bu­tion. Pro­duc­tiv­ity im­prove­ment largely de­rives from cap­i­tal-in­ten­sive in­dus­tries in the early stage of in­dus­tri­al­iza­tion and hu­man-cap­i­tal-in­ten­sive in­dus­tries in a ser­vice-based econ­omy. Pro­duc­tiv­ity growth re­flects the level of hu­man cap­i­tal deep­en­ing and de­ter­mines a coun­try’s wel­fare level. Grow­ing TFP con­tri­bu­tion to the econ­omy re­flects tech­nol­ogy progress and im­proved al­lo­ca­tion ef­fi­ciency. TFP con­tri­bu­tion will in­crease only when TFP growth ex­ceeds fac­tor in­put growth. In ad­di­tion, TFP con­tri­bu­tion mea­sures the con­tri­bu­tion of en­doge­nous growth. For a coun­try, in­creas­ing TFP con­tri­bu­tion means that a coun­try be­comes less de­pen­dent on fac­tor in­put and pur­sues en­doge­nous growth. TFP growth it­self is an an­ti­dote to di­min­ish­ing re­turn to scale due to hu­man and cap­i­tal deep­en­ing.

Over the past four decades, cap­i­tal in­put has contributed to 70% to 80% of China’s GDP growth. Af­ter tak­ing into ac­count cap­i­tal and la­bor con­tri­bu­tions to growth, ef­fi­ciency im­prove­ment con­trib­utes about 20% to 30% of GDP growth. Ob­vi­ously, low TFP con­tri­bu­tion re­flects China’s cap­i­tal-driven growth pat­tern. (1) Growth of cap­i­tal in­ven­tory kept ac­cel­er­at­ing. As Ta­ble 9 re­veals, China’s cap­i­tal in­ven­tory main­tained an an­nual growth rate of around 11% dur­ing 1978-2007, a pe­riod of sus­tained rapid growth for China. This growth rate is high in ab­so­lute terms no mat­ter com­pared with which coun­try in a sim­i­lar de­vel­op­ment stage. De­spite China’s fall­ing po­ten­tial growth rate dur­ing 2008-2013, its cap­i­tal





stock still main­tained a high growth rate of 11%-12%. (2) Mar­ginal re­turn to cap­i­tal con­tin­ued to di­min­ish. Long-term de­pen­dence on in­vest­ment caused mar­ginal re­turn to cap­i­tal to di­min­ish. The vi­cious cy­cle of di­min­ish­ing re­turn and slug­gish growth, to­gether with in­ef­fi­cient cap­i­tal-driven growth pat­tern, be­came ap­par­ent. As Ta­ble 9 shows, cap­i­tal ef­fi­ciency (Y/K, ra­tio be­tween GDP and cur­rent-year in­vest­ment) was 0.302 dur­ing 1978-2007 and only 0.079 dur­ing 2008-2015.

We cal­cu­lated China’s TFP us­ing a sim­ple Cobb-Dou­glas pro­duc­tion func­tion: (1) TFP contributed 23.33% of growth dur­ing China’s eco­nomic take­off of 1978-2007. Dur­ing 1993-2007, TFP con­tri­bu­tion to growth ex­ceeded 35% (Lu et al.). Yet dur­ing 2008-2018, as growth slowed, TFP con­tri­bu­tion fell be­low 20%. This pe­riod was char­ac­ter­ized by a hefty stim­u­lus to in­crease cap­i­tal ac­cu­mu­la­tion. As re­turn to the scale of cap­i­tal di­min­ishes, po­ten­tial growth rate will con­tinue to de­cline un­less the low TFP con­tri­bu­tion is re­versed.

Eco­nomic re­struc­tur­ing, in­sti­tu­tional com­pat­i­bil­ity and ef­fi­ciency path re­shap­ing are fun­da­men­tal for China to cross the thresh­old of a new de­vel­op­ment stage. Since the 19th CPC Na­tional Congress, the ba­sic ap­proach for eco­nomic de­vel­op­ment fur­ther im­proved with em­pha­sis on the fol­low­ing el­e­ments: first, to pro­pel high-qual­ity de­vel­op­ment; sec­ond, strive to trans­form growth pat­tern, eco­nomic struc­ture and growth mo­men­tum; third, ac­cel­er­ate the de­vel­op­ment of a modern eco­nomic sys­tem with high qual­ity and ef­fi­ciency. In the mid­dle-in­come stage, great un­cer­tain­ties ex­ist in China’s ef­fi­ciency path, de­vel­op­ment mech­a­nism and re­struc­tur­ing. With­out proper mech­a­nisms to sup­port re­struc­tur­ing, up­grade and shift to a new ef­fi­ciency path, it would be dif­fi­cult, or at least very slow, for growth to tran­scend the bot­tle­necks.

In the in­dus­trial era, the “struc­tural­ism” of de­vel­op­men­tal eco­nomics elicited ex­ten­sive pol­icy dis-


改革开放至今近40年来,资本投入对GDP增长的贡献,一直维持在70%~ 80%的水平,综合考虑资本、劳动力对增长的贡献之后,效率改进对G D P增长的贡献大致维持在20% ~ 30%的水平。显然,这种较低的T F P的贡献,是中国资本驱动的增长模式的特定现象。①资本存量增长持续加速。表9显示,在经济持续超高速增长的1978~ 2007年间,资本存量平均增长速度为11%左右,不论与哪个发展阶段相似的国家相比,这个资本积累速度都是绝对高的。2008~ 2018这个时期,虽然中国的潜在增长速度下降了,但是资本存量的增长速度仍然维持在11% ~ 12%的高水平。②资本边际收益持续递减。长期的投资依赖导致资本边际报酬递减,而且报酬递减和低增长的不良循环以及中国资本驱动模式路径依赖的低效率问题越来越明显。表9显示,1978~ 2007年,资本效率(Y/K,即GDP与当年投资之比)为0.302,至2008~ 2018年,仅为0.079。

用简单的柯布——道格拉斯生产函数对中国T F P进行计算得出:①1978~ 2007年中国高峰增长期间, T F P贡献对经济增长的贡献为23.33%,细算1993年到2007年T F P对经济增长的贡献超过了35%(陆明涛等, 2016),但到了2008~ 2018年期间,经济增长速度下滑的同时,各种计算表明T F P贡献降低至20%以下,同期主要是靠大规模刺激资本积累的方式来进行,展望未来增长,资本规模递减特征会越来越严重,不改变T F P低贡献现状,潜在经济增长率将会持续下降。


cus­sions and coun­try ex­pe­ri­ences - the most im­por­tant is gov­ern­ment in­ter­ven­tion. For late-mov­ing coun­tries with­out a com­plete mar­ket sys­tem, the gov­ern­ment may also act as a su­per mar­ket entity to com­pen­sate for mar­ket im­per­fec­tions. (1) In­dus­trial pol­icy, se­lec­tive fi­nan­cial pol­icy and tax pref­er­ences are of­fered to sup­port man­u­fac­tur­ing. (2) Var­i­ous meth­ods such as in­ter­est rate reg­u­la­tion are em­ployed to raise funds, sup­press la­bor com­pen­sa­tion, in­crease re­turn to cap­i­tal, pro­mote in­vest­ment and re­gional com­pe­ti­tion, and use the funds raised do­mes­ti­cally and over­seas to sup­port man­u­fac­tur­ing. (3) Adopt open­ing-up pol­icy to ex­pand mar­ket size and ex­change rate pol­icy to in­crease in­ter­na­tional com­pet­i­tive­ness through de­pre­ci­a­tion. (4) Com­plete “learn­ing by do­ing” through equip­ment im­por­ta­tion and pro­pel tech­nol­ogy progress and in­dus­trial up­grade. (5) In­crease GDP com­pe­ti­tion at the lo­cal level. Rapid in­dus­tri­al­iza­tion could not have been achieved with­out proac­tive gov­ern­ment in­ter­ven­tion. With typ­i­cal “economies of scale” char­ac­ter­is­tics, in­dus­tri­al­iza­tion will in­crease ef­fi­ciency and ac­cel­er­ate growth, thus off­set­ting the cost of in­ter­ven­tion.

China’s in­creas­ingly ser­vice-based econ­omy is also fraught with un­cer­tain­ties. In par­tic­u­lar, in­con­sis­ten­cies have ap­peared among growth, struc­ture and ef­fi­ciency. In­ter­na­tional ex­pe­ri­ence also shows that the growth paths of coun­tries di­verged af­ter eco­nomic re­struc­tur­ing. It re­quires care­ful un­der­stand­ing to elu­ci­date un­cer­tain­ties in the shift of ef­fi­ciency path. We may ar­rive at the fol­low­ing con­clu­sions based on the em­pir­i­cal facts of struc­ture and ef­fi­ciency:

(1) Struc­tural and ef­fi­ciency paths may not be syn­chro­nized. Based on above cal­cu­la­tions, when an econ­omy be­comes ser­vice-based, ser­vice sec­tor will ac­count for a grow­ing share yet is less ef­fi­cient than in­dus­trial sec­tors. Ris­ing share of ser­vice sec­tor, there­fore, is in­evitably ac­com­pa­nied by fall­ing pro­duc­tiv­ity. This process is dif­fer­ent from in­dus­tri­al­iza­tion. Ser­vice-fu­eled growth is not syn­chro­nized with in­creas­ing re­turn to scale and ef­fi­ciency. In fact, ser­vice sec­tor is less ef­fi­cient in its scale of de­vel­op­ment com­pared with in­dus­tri­al­iza­tion. This is why growth rate af­ter ser­vice-based will de­cel­er­ate when the share of ser­vice sec­tor grows. Yet the ef­fi­ciency and qual­ity of growth will di­verge. While ser­vice sec­tor con­trib­utes to the ef­fi­ciency and sta­bil­ity of growth for ad­vanced economies, ef­fi­ciency im­prove­ment slows and eco­nomic struc­ture be­comes more dis­torted for late-mov­ing coun­tries, mak­ing them more vul­ner­a­ble to ex­ter­nal shocks. A typ­i­cal em­pir­i­cal fact is that ef­fi­ciency path is non-con­tin­u­ous and di­verges af­ter an econ­omy be­comes ser­vice-based.

(2) Ser­vice-based econ­omy tends to cause “Bau­mol dis­ease” or “cost dis­ease”. In­ef­fi­cient ser­vice sec­tor and ro­bust de­mand for ser­vices lead to cost hikes, caus­ing ser­vice price to in­crease rel­a­tive to man­u­fac­tur­ing price, i.e. in­ef­fi­cient im­prove­ment leads to price hikes that in­crease the cost of ser­vices. In the broad sense, cost dis­ease is re­flected as the “cost dis­ease of ur­ban­iza­tion”, i.e. high-cost ur­ban­iza­tion. Yet ur­ban­iza­tion it­self does not raise the ef­fi­ciency of ag­glom­er­a­tion and in­no­va­tion and, on the con­trary, leads to ris­ing cost for the so­ci­ety as a whole. The cost prob­lem of cities threat­ens not only man­u­fac­tur­ing sec­tor but ser­vice up­grade as well.

(3) Un­cer­tain­ties of in­dus­trial up­grade. Ur­ban­iza­tion is a nat­u­ral out­come of eco­nomic de­vel­op­ment. Af­ter ur­ban­iza­tion rate ex­ceeds 50%, the share of ser­vice sec­tor will in­crease rapidly and the share of man­u­fac­tur­ing sec­tor will fall - both of them face the in­trin­sic re­quire­ments of in­dus­trial up­grade, i.e. in­dus­tries that rely on low-cost ad­van­tage will van­ish un­der grow­ing cost pres­sures. On the other side of the coin, this process also brings op­por­tu­ni­ties of ef­fi­ciency im­prove­ment aris­ing from ur­ban ag­glom­er­a­tion and in­no­va­tion spillover. Cost is rac­ing against ef­fi­ciency. Ex­cess cost hike and slow­ing ef­fi­ciency im­prove­ment are an em­pir­i­cal fact of China’s ur­ban­iza­tion (Fron­tier Re­search Group, 2009). High-cost hous­ing and pub­lic ser­vices have led to rapid “de-in­dus­tri­al­iza­tion” in China’s ur­ban­iza­tion process, mak­ing it less likely for pro­ducer ser­vices to im­prove ef­fi­ciency. Hav­ing lost its strate­gic pil­lar, in­dus­trial up­grade be­comes more un­cer­tain.

(4) Un­cer­tain­ties ex­ist in the path of tech­nol­ogy progress from “learn­ing by do­ing” to in­dige­nous in­no­va­tion. “Learn­ing by do­ing” is nor­mally ho­mo­ge­neous tech­nol­ogy progress and is sub­ject to the lim­i­ta­tion of gaps with in­ter­na­tional lev­els of tech­nol­ogy; the closer the progress is to the tech­nol­ogy


工业化时期,发展经济学的“结构主义”进行了很多政策的总结,各国也做了很多实践,归纳起来最重要的就是政府的干预。在后发国家市场体系尚未建立,政府可以作为市场参与的超级主体以弥补市场的不完善性,提出了:①工业化“补贴”,利用产业政策、选择性金融政策、税收优惠政策等鼓励制造业发展;②资本积累激励,国内通过利率管制等各类方法筹集资金,压低国内劳动报酬,提升资本报酬,从而进行招商引资,并展开区域性竞争,达到国内外筹集资金用于制造业的快速发展;③开放政策,扩大市场规模,汇率政策上通过贬值提高国际竞争力等;④通过引进设备完成技术进步的“干中学”,推动国内制造业的技术进步和产业升级; ⑤将G D P作为广泛的激励相容性指标,推动地方G D P的竞争。工业化的快速推进离不开政府的积极干预,工业化具有典型的“规模经济”特征,经济效率同步提升,经济结构具有加速增长和提升效率的双重作用,并足以弥补干预带来的成本。





level of fron­tier coun­tries, the less ef­fi­cient it be­comes. It is also lim­ited by the scale of de­mand. Due to tech­no­log­i­cal ho­mo­gene­ity, “learn­ing by do­ing” may lead to di­min­ish­ing re­turn to scale. In the mid­dle-in­come stage, tech­nol­ogy progress from “learn­ing by do­ing” be­comes less ef­fi­cient. How­ever, this does not nec­es­sar­ily lead to an in­creas­ing share of in­no­va­tion. In­dige­nous in­no­va­tion must be sup­ported by cap­i­tal mar­kets in or­der to cre­ate “mo­nop­o­lis­tic rents” for intellectual prop­erty rights. In­no­va­tion is het­ero­ge­neous. As in­no­va­tions be­come more risky, it takes more hu­man cap­i­tal in­put, dis­trib­uted in­no­va­tion and mar­ket-based “high pric­ing” in­cen­tives. Yet given the un­cer­tain­ties in in­no­va­tion, com­pa­nies and gov­ern­ments are more in­clined to pur­sue tech­no­log­i­cal evo­lu­tion through im­por­ta­tion and “learn­ing by do­ing”. Growth based on “learn­ing by do­ing” tech­nol­ogy progress is less sus­tain­able. More­over, the “learn­ing by do­ing” path will lead to ex­ces­sive in­vest­ment on tech­nol­ogy im­por­ta­tion that may lock up the path of tech­nol­ogy evo­lu­tion and sup­press lo­cal in­no­va­tion. In­dige­nous in­no­va­tion and “learn­ing by do­ing” have their re­spec­tive pros and cons and may not nec­es­sar­ily re­in­force each other. TFP re­mains the most im­por­tant in­di­ca­tor. Fall­ing TFP con­tri­bu­tion is an in­di­ca­tion of chal­lenges fac­ing tech­nol­ogy progress. As in­ter­na­tional ex­pe­ri­ence sug­gests, for most coun­tries that moved from low-in­come stage to mid­dle-in­come stage, the TFP in­creased rapidly in the early stage with im­prov­ing con­tri­bu­tion. Yet in the mid­dle-in­come stage, their TFP de­clined sig­nif­i­cantly. The rea­son is that tech­nol­ogy path in this stage is no longer con­tin­u­ous and needs to be shifted.

(5) Un­cer­tain­ties in con­sump­tion up­grade. Tran­si­tion to­wards a ser­vice-based econ­omy re­quires an in­creas­ing share of hu­man cap­i­tal in con­sump­tion. Hu­man cap­i­tal must be im­proved in sync with struc­tural up­grade to form dy­namic ef­fi­ciency com­pen­sa­tion of con­sump­tion. This process, how­ever, is also fraught with un­cer­tain­ties. Suc­cess­ful tran­si­tion re­quires ser­vice sec­tor to be freed from ex­ces­sive reg­u­la­tion, con­sumer ser­vices to im­prove hu­man cap­i­tal and con­sump­tion ef­fi­ciency to in­crease.

With a ser­vice-based econ­omy come a more so­phis­ti­cated eco­nomic sys­tem, dis­trib­uted in­no­va­tion and in­cen­tives for high-qual­ity hu­man cap­i­tal. Eco­nomic growth gives rise to “non-com­pet­i­tive” fac­tors in­clud­ing in­sti­tu­tional rules, cre­ativ­ity, knowl­edge shar­ing, ed­u­ca­tion and in­for­ma­tion net­works. The qual­ity of these new growth fac­tors de­ter­mines whether ser­vice-based econ­omy will pro­pel con­sump­tion up­grade in this stage.

Struc­tural so­phis­ti­ca­tion of ser­vice sec­tor is the foun­da­tion for China’s growth ef­fi­ciency model; such so­phis­ti­ca­tion is re­flected in the in­creas­ingly knowl­edge and tech­nol­ogy-in­ten­sive ser­vice sec­tor. First, modern ser­vice sec­tor con­trib­utes to over­all eco­nomic ef­fi­ciency. Sec­ond, a be­nign cy­cle of hu­man cap­i­tal im­prove­ment comes into play. In other words, we re­gard ser­vice sec­tor as a ve­hi­cle of knowl­edge process and hu­man cap­i­tal ac­cu­mu­la­tion rather than an aux­il­iary process or cost item of in­dus­trial sec­tors. In ad­di­tion to in­creas­ing in­dus­trial ef­fi­ciency, modern ser­vices are the en­gines of in­no­va­tion and growth as well. In this sense, ser­vice ef­fi­ciency must im­prove in sync with in­dus­trial ef­fi­ciency in or­der for the high ef­fi­ciency model to sus­tain.

Struc­tural up­grade is the key to con­sump­tion and ser­vice growth. Two pos­si­ble path­ways ex­ist in the growth tran­si­tion to­wards ad­vanced ur­ban­iza­tion: First, low-skilled work­force con­tin­ues to dom­i­nate ser­vice sec­tor at the in­er­tia of in­dus­trial ex­pan­sion; sec­ond, ser­vice growth is sup­ported by knowl­edge process. Ser­vice sec­tor in­evitably grows in size and pro­por­tion as the econ­omy be­comes ser­vice-based. Yet this process should be fu­eled by ser­vice and con­sump­tion up­grade. For ed­u­ca­tion, en­ter­tain­ment and some other sec­tors, con­sump­tion is a process that takes time to com­plete. For in­stance, in face-to-face com­mu­ni­ca­tion, knowl­edge pro­duc­ers cre­ate and dis­sem­i­nate knowl­edge and con­sumers re­ceive knowl­edge. Con­sumers will pay ac­cord­ing to the nov­elty of in­for­ma­tion stream and the level of psy­cho­log­i­cal sat­is­fac­tion - of­ten with a price pre­mium for high-qual­ity knowl­edge.

In the In­ter­net era, knowl­edge-in­ten­sive ser­vices have be­come more trad­able. Not only does the In­ter­net in­crease the dis­sem­i­na­tion, pro­duc­tiv­ity and out­put of knowl­edge, it also makes it pos­si­ble for con­sumers to ac­cess cus­tom­ized ser­vices from an ocean of re­dun­dant in­for­ma­tion.

Knowl­edge process must be em­bed­ded into tra­di­tional ma­te­rial pro­duc­tion. This is par­tic­u­larly rele-


⑷“干中学”转向“自主创新“的技术进步路径不确定。“干中学”的技术进步往往是同质性的技术进步,它首先受到本地与国际技术水平差距的限制,越接近前沿国家的技术水平,其效率越低;其次,它受到需求规模的限制,由于技术同质性特征,很容易导致“规模收益递减”。进入中等收入阶段,随着与先进技术差距缩小和需求多样性,干中学技术进步效率迅速下降,但这并不直接导致自主创新比重的提高。自主创新核心就是自主知识产权能得到“垄断租金”的激励,更要获得资本市场的激励才能完成自主创新活动。自主创新是异质性的,其创新风险不断提高,需要更多的人力资本投入和分布式创新活动,需要市场化的“高定价”激励才能完成。但由于自主创新不确定,公司和政府都愿意通过引进的方式走“干中学”的技术演进道路,消除不确定性,这无可厚非。但是一个仅仅限于“干中学”技术进步的增长,其持续性受到了限制,而且“干中学”路径会导致“过度投资”引进技术和锁定技术演进路线,压制本土创新性。自主创新和“干中学”不是一个技术路径的简单好坏的争论和自动转换,其机制建设是根本,衡量的最重要因素仍是TFP,如果TFP贡献持续下降,则认为技术进步演进出现了挑战。从国际经验比较看,从低收入阶段跃进到中等收入阶段的大多数国家在早期阶段T F P上升很快,贡献率也明显提高,但进入中等收入阶段后T F P下降明显,说明这一阶段的技术路径已经不是连续性的了,需要路径的转换。





vant for catch-up coun­tries that face se­ri­ous chal­lenges to con­sump­tion up­grade.

Af­ter four decades of re­form and open­ing-up, China has em­barked upon a cru­cial tran­si­tion from rapid growth to high-qual­ity growth - a tran­si­tion that re­quires sup­ply-side struc­tural re­forms to im­prove pro­duc­tiv­ity and ef­fi­ciency, ex­plore new growth driv­ers and in­crease TFP. The goal is to cre­ate a mar­ket-based eco­nomic sys­tem with ap­pro­pri­ate macro reg­u­la­tion and vi­brant mi­cro-level en­ti­ties to in­crease China’s eco­nomic prow­ess and in­ter­na­tional com­pet­i­tive­ness and pave the way for achiev­ing the “two cen­ten­nial goals”.

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