On China's Sustained Economic Growth

Since the reform and opening up in 1978, China has maintained a robust economic growth in three decades and has enjoyed the world's fastest economic growth. What is the long-term support for China's sustained rapid economic growth? How great is the potential for the rapid growth? Can China maintain the continued sound economic growth in the next decade or more? To sustain the growth, what policies need to adjust? These problems are in urgent need to answer for China's economic development. Therefore, the subjects of this study are:the characteristics, impetus and potential of the sustained high growth of the Chinese economy since 1978 and the effective ways to achieve the sustained high growth from the theoretical and empirical perspective.The main content is as follows:Chapter One--Introduction. It mainly discusses the research background, purpose, research ideas, research methods, innovation and shortcomings of the dissertation.Chapter Two--Theory Review and Literature Review. First, it looks back on the development of the economic growth theory. Then, it reviews and comments literature about researches on the fundamental cause of and sustainability of China's economic growth, noting their significance of reference and guidance in China's economic growth. The development of economic growth theory and that of economic theory and of thought analysis theory go along simultaneously. The economic growth theory can be phased into five stages of development--classical economic growth theory, the Marxist theory of economic growth, neoclassical growth theory, new Cambridge economic growth theory and new growth theory (also known as endogenous growth theory). Many foreign scholars believe that China's economic growth is attributable to factor inputs, so the quality of economic growth is not high. But conclusions of Chinese domestic scholars'studies on total factor productivity and results of foreign researches are inconsistent, even diametrically opposed. The chapter summarizes and reviews the research literature in order to facilitate our objective understanding of achievement and cause of China's sustained economic growth since reform and opening up and of potential and feasibility of maintaining China's economic growth.Chapter Three--Overview of China's Sustained Growth Economy. Since the reform and opening up, China's economic growth has made remarkable achievements and history miracles. From the supply and demand perspective and the perspective of TFP, the chapter carries out quantitative and qualitative analysis of the traditional driving force of China's sustained growth economy over the past 32 years. The results show that the accumulation of capital, the growth of labor input and the increase of growth total factor productivity are the three economic growth impetus; specifically, they can be divided into a multitude of aspects--marketization, internationalization, demand, exports, technological progress, demographic dividend, high savings, high investment and institutional restructuring and the like. The changing trend of the contribution rate of three major industries in China's economic growth reflects a series of features of the economic growth in China:firstly, China's economic development is at the stage of industrialization, so almost all of the years the contribution of the secondary industry is the largest; secondly, with economic development and particularly since the transition, the contribution of the tertiary industry has increased gradually and the contribution rate of the first and second industry continues to drop. However, sustained growth of China's economy continues to rely mainly on the promotion of secondary industry, especially industry.Chapter Four--Challenges and Opportunities of Sustained Growth of China's Economy. While noting great economic achievements of China's sustained growth, we must also take heed of problems appearing in the process of China's economic growth. In the process of rapid economic growth, China has consumed a lot of energy and resources. Since the reform and opening up, although the structure of the three industries has been considerable developed and improved, the industrial structure is still unreasonable; especially the portion of the tertiary industry is too low. From the industrial structure, the primary industry proportion in the eastern region is below that of the national average, the proportion of secondary and tertiary industries is higher, while the proportion of primary industry in central and western regions is above the national average and the proportion of secondary and tertiary industries is lower. The economic development in east is of a higher level, agriculture takes up a small proportion while the tertiary industry a high proportion, so the industry structure is optimized. Since reform and opening, China has achieved rapid economic growth, while people's income levels have been significantly raised. However, in the process of economic development, the income gap has also expanded each year. Specifically, the urban-rural income gap, regional income gap and the gap among national, corporate and residential distribution of income are expanding. U.S. financial crisis has a trivial direct impact on macro economy and a relatively tremendous indirect effect. And mainly through the change of RMB exchange rate, international market price fluctuations, and the reduction of U.S. domestic demand and other ways, it makes decline of the three great demands--China's exports, investment and consumption--to some degree. For a short term, the financial crisis has a negative effect on China's economic growth, but we should also notice that it offers us new opportunities to solve various contradictions in the development. Financial crisis enables the elements and the world commodity prices to fall, and of, so it has provided good conditions for us to use international resources for the development of the Chinese economy.Chapter Five--Analysis of Potential for Sustained Economic Growth. Since reform and opening, China has experienced average annual economic growth of 9.9%. By 2030, is China's economy still able to maintain such a rapid growth? How great is China's economic future growth potential? To answer this question, we need to first make a correct analysis of power and sources of sustained growth of Chinese economy, because only based on accurate analysis of a variety of factors determining the economic growth can we make scientific prediction of future economic development potential. Although since the reform and opening up, China's human capital, technological progress and institutional reform have made considerable progress, in the world they are still at a low level lagging far behind the developed countries. Although the calculated results show that after 2000 the contribution rate of these three factors presents weakening in the economic growth, they have a substantial potential in the future to be the main driving force of sustained growth of the future Chinese economy. In the aspect of the factor inputs, investment is still one important engine of sustained and stable economic growth in the future, but investment efficiency requires extra attention. In detail, enormous potential for China's future sustained economic growth can be tapped in the following areas:domestic demand, urbanization, the tertianry industry, technological innovation and reform. In a nutshell, the transformation of the economic development mode and the adjustment of the economic frame are cause and impetus of China's continued growth. Specifically, China's future sustained economic growth can be accomplished through exploiting the following areas of high potential:domestic demand, urbanization, industrialization, export, the third industry, technological innovation, industrial structure adjustment and upgrading, and reform and opening up. This chapter, building a dynamic stochastic general equilibrium (DSGE) model, quantizes the transformation of the economic development mode and the adjustment of the economic frame into 13 specific shocks, to simulate the actual operation of China's economy and to analyze and predict its long-term growth. According to the forecasts, in the next 20 years, China's average annual GDP growth rate is 8.2% and the Chinese economy can continue to grow for at least 20 years.Chapter Six--ffective Ways to Achieve Sustained Growth of the Chinese Economy. Empirical analysis of sustainability and policy direction of China's economic growth is conducted; that is, for how long China's economic growth will last. The empirical dynamic stochastic general equilibrium (DSGE) model is applied to analyze and predict China's sustained economic growth and it is also utilized in empirical analysis of policy choice to achieve sustained growth of China's economy in the post-crisis era. All countries wish to maintain stable and rapid economic growth, because without stable and rapid economic growth, we can not guarantee economic prosperity, without economic prosperity, we can not meet the people's growing material and cultural needs. To achieve sustained economic growth, the use of fiscal and monetary policy must be coordinated. In 2011, continuity and stability of macroeconomic policies should be maintained and the proactive fiscal policy and prudent monetary policy should continue to be implemented and constantly enriching and improving the package of policies to stimulate economic development are required by the situation. Shift the current "anti-crisis, anti-panic" short-term response policy to macroeconomic policies focusing on economic restructuring and development of new sources of growth and accounting for the short-term situation. Reform income distribution system, expand residential income proportion and establish consumer demand stimulus policy helping raise the consumption rate, and form the consumption structure giving priority to domestic need.Chapterâ…¦--Conclusion. We should accelerate the transformation of economic development mode and the adjustment of economic structure. Firstly, adjust the demand structure and enhance consumption power. In the adjustment of the consumption frame, give privilege to promotion of the consumption ability, improvement of the citizens'consumption conditions and cultivation of new consumption hot spots. Raising the income of residents, especially low-income people, is the basis to enhance the consumption ability, which calls for speeding up the reform of income distribution. Secondly, adjust the industrial structure and improve the core competitiveness of industries. Expedite the transformation and updating of traditional manufacturing industry and quicken the development of service industry to optimize the core competitiveness of industries. Thirdly, improve energy conservation and address the climate change to develop the green economy. Strengthening energy conservation is an important aspect of the strategic readjustment of economic structure; implementing the policy of controlling greenhouse gas emissions is an important task of the strategic readjustment of economic structure. Fourthly, plan the overall development and utilization of land space and push forward regional development coordination. In China, a developing country, regional structural adjustment occupies a unique and vital position in the strategic adjustment of economic structure. So, we should promote the construction of main zones, accelerate the national planning of main function zones, formulate appropriate laws and regulations, improve assessment criteria and interest compensation mechanism to standardize the development order, to control the development intensity, and to guide the various regions'development in strict accordance with the main function aim, in order to form a highly efficient, coordinated and sustainable national spatial development pattern. Actively and steadily promote urbanization. Scientifically plan function localization, industries allocation and exploitation border in medium cities and small towns, to ease the pressure on large cities; strengthen industrial capabilities of small and medium cities, enhance public services and living conditions of small towns, and promote the formation of a new pattern of urbanization in terms of integration of basic public services and infrastructures in small cities and networking development. In short, the theme of the long-term stable and rapid economic development is scientific development and the main line is to accelerate the transformation of the economic development mode.The main contribution and innovation of the dissertation is reflected in the following aspects: First, it clarifies several issues related to China's rapid economic growth by theoretical and empirical analysis, such as growth skepticism and the limit of growth.Second, it makes an analysis of the applicability of our economy by testing and employing the dynamic stochastic general equilibrium model (DSGE), the analysis of the conduction applicability of the fiscal policy and monetary policy in particular.Third, it builds a dynamic stochastic general equilibrium (DSGE) model. Applying the growth model and combining the theory of development economics and growth-related thinking, it presents a theoretical and more-consistent-with-the-reality explanation of the sustained growth of China's economy since the reform, makes an analysis and prediction of the duration of high increase and sums up its policy implications for economic development.Although the dissertation has cost great efforts, it reveals some obvious shortcomings:first, it reflects insufficient research on the latest literature with regard to economic growth at home and abroad; second, the empirical analysis uses data which is not necessarily the latest; besides, models are built on one aspect of China's economic growth, which is inadequate and demands further studies in the future.