Study On The Sustainability Of China's Economic Growth

In the beginning of reform and opening, Chinese goverment emphasized growth speed and tried to catch up with developed countries as quickly as possible. Therefore, various approaches were implemented to make full use of natural resources and capital investment to ensure high economic growth speed. Because the problem of natural resources shortage in the early days hasn't emerged, the resources driven growth pattern, which depended on numerous factor inputs, has indeed made China's over 30 years'rapid growth as well as improved the lives of most citizens significantly. But when the economy developed to a certain extent, those seemingly abundant resources in fact can hardly meet the great requirements of long-term development, and those institutional innovations aimed to improve efficiency couldn't meet people's requirements of the social equity and harmonious development either. High speed economic growth can somewhat eased the problems and social contradictions, but at present these issues as the"legacy of high speed growth"cann't be neglected any longer, and it has become big obstacles to further development. Because of the outbreaking of the 2008's international financial crisis, the deep-seated contradictions of China's economic development further highlighted and appear : increasing the proportion of investment, some local"three highs"industry not containmented but also having the rise trend, some industries'overcapacity problem becoming increasingly prominent, the environmental pollution problem increasingly serious and over-consumption of energy and resources,etc. If we do not step up to address the high growth, low efficiency, the extensive mode of economic development, we will pay a higher price in the future.At this critical stage of transition, the discussion on the sustainability of China's economic growth once again becomes the focus of attention at home and abroad. Whether China can continue to take the old path of industrialization over the past 30 years? My thesis will focus on this issue. On the basis of literature review and comparative study, this paper combined traditional economic growth theory with the actual characteristics of China's economic growth, then focus on three main line of analysis, that is the source of China's economic growth, the judgment about China's economic growth pattern and forecasting the prospects for China's economic growth in the future. Actually, analysis of the three main lines of this study is essentially answered the question about Chinese economy is"what","how"about Chinese economy and China's economy"should be". So that we can accurately understand and answer the question of China's economic sustainable growth. The main contents and conclusions are as followings:Firslyt, the Kaldor"stylized facts". The practice of economic growth is the basis for emergence and development of growth theory, Kaldor extract and summarize six aspects of "stylized facts"from the practice of economic growth around the world, and treat it as a criteria for stable economic growth. After the comparative study on Kaldor stylized facts between China and other country which has steadied economic growth, we found that characteristics of China's economic growth compared with other countries, not only contains the terms consistent, but also contains different side. Including return of capital decline, the capital-output ratio in 1994 as a dividing line showed two phases, and the labor share of national income is gradually decreased.Secondly, Construction of China's economic growth model and a source of economic growth accounting. China's complex economic environment determines the specificity of each stage of development, and in turn the various elements play different roles at different stages. Therefore, this article selected different production function model for different development stages, in order to obtain more accurate contribution of factors. The empirical results show that: from 1952 to 1977, the neoclassical growth model is more reasonable to fit China's economic growth, from 1978 to 2008, the extended model of human capital is more appropriate fit China's economic growth. If the study period from 1952 to 2008, the effective labor model in turn to get a better fitting result. Regardless of effective labor or human capital externalities model, through a measurement of total factor productivity growth are showing rapid decline since 1994.Thirdly, the judgments and analysis of China's high growth mode. This paper analyzes the quality and efficiency of growth in four dimensions: from Intensive index constructed by TFP growth rate, China's economic growth turned to the extensive growth mode from 1994; from the perspective of investment efficiency, China's investment efficiency is dropped to negative after 1997, and is consistented with the trend of TFP growth. This shows that from 1997, the economic growth is relying on continued capital investment to compensate for the lack of investment efficiency. Also found that there is the"inverted U"relationship between growth rate of capital productivity and investment growth, and in recent years the investment growth rate has exceeded the optimal threshold, indicating that the phenomenon of over-accumulation of capital; from the perspective of national income distribution, when capital productivity is less than zero, to alleviate the downward trend in return on capital, we need to keep compression on the labor share; from the perspective of expenditure distribution, because of the capital productivity rate was negative in the long term, the expenditure distribution continue to shift to saving and investment.Fourth, the formation mechanism of high growth pattern under the background of low efficiency of investment. This article summarizes four development path and six formation mechanism for the economic growth in China, that is to catch up with developed countries as soon as possible, we have been relying on high investment to promote high growth, triggering a series of problems: Price distortions of resources make the high investment to achieve, on the one hand led to serious environmental damage, on the other hand will increase the monopoly capital gains, retained a large number of capital; high accumulation will crowd out spending, leading to excess capacity; overcapacity in turn lead to external economic imbalances produce a large number of foreign exchange accumulation, excess liquidity has brought; Finally, the large capital retention, excess liquidity of funds, low market interest rates, and local government non-commercial act will further stimulate new investment boom, again caused overcapacity. Relying on high investment-driven high growth and, ultimately, the results are back on the dead end of the high investment, so the cycle repeated, the accumulated problems will intensify.Finally, forecast of China's economic growth. Based on HP filtering, the production function and UC-Kalman filter methods, we estimate the potential economic growth rate in China is about 8% to 9.5%. But given the supply of resources and environmental factors, it is difficult to support the future growth of more than 8%. Finally, the paper design a sustainable growth model, which can improve efficiency through technical and system improvements, China's reasonable economic growth is about 6% to 7% in the next decade.The innovations of this paper are as follows:(1)Method Innovation: Accountting for the source of economic growth in China, this paper in an innovative way to introduce full-cycle and sub-cycle estimation, and combined with human capital externalities and internal effects, establish different economic growth model for different stages of our economic period. Most of the existing literatures are based on empirical judgments to set the production function directly, but the process of China's economic growth in the 60-year is complex, maybe a single production function model is unlikely to reflect the facts of China's economic growth fully and accurately.(2)Ideas Innovation: the judgment about China's high economic growth pattern. This paper emphasise that when the type and the property of technical progress is not at the same time, we could not just using the change of total factor productivity model to determine the sustainability of economic growth, if growth factor and endowment structure of power matching the source and achieving optimization allocative efficiency, we also believe that the economic growth is sustainable. In order to accurately analyze China's high growth mode, the article emphasize from the perspective of growth's efficiency and quality to investigate sustainability. Specifically, we analyze the relationship between investment efficiency and three indicators which reflecting the quality of economic growth, so as to get more comprehensive and accurate analysis of China's high growth operating efficiency and effectiveness.(3)Conclusion Innovation: In this paper, We use some traditional methods, such as economic growth accounting, investment efficiency decomposition, potential output estimation and other methods, to draw some innovative ideas and conclusions. For example, China's economic growth has shown some of the non-Kaldor"stylized facts"feature is actually the problem which hidden in the course of high -growth. Using 1996～1997 as the cutoff point, the Chinese economy is entering a period of high investment and low efficiency, both investment efficiency and TFP growth rate is negative, to compensate for the low efficiency of investment, a series of price distorted mechanisms support for the high investment situation. However, the harm caused by low efficiency will not disappear, even if economic growth is rapidly rising, on the contrary, these issues and elements of the bottleneck will reduce economic growth rate in the next decade, if not promptly adjust, will bring more serious risk.