Institutional Change In China's Economic Growth Potential Release

Since reform and opening-up, outstanding achievements have been made in China. China's comprehensive power has been increased and people's life has been improved. How does all this come into being? Or what elements have played a major role in all this? What factors in China have played a contributive role to its economy? And what factors have played an obstructive role? What factors are able to promote and release the economy potential in future? This series of questions will be dealt with in this paper.Before answering these questions, this paper will first review the theory of economic growth factors. The school of Classical economics headed by Adam Smith studies the factors of labor and capital and the school of neo-classical economics headed by Marshall Studies the role of economic factors other than labor and capital in economic development. Then the school of new economic development headed by Romer considers the technical internalization as the major factor in development. Besides that, the economic school headed by North regards institutions as the most important factor in development. After that the element of institutions was introduced to economic development. And this is the theoretical basis of this research. The realistic basis of this paper in the research of institutional changes is the achievements and problems that have arisen in China's economic development since reform and opening-up.After the theory of economic development and institutional changes is reviewed, based on the theoretical model of institutional changes proposed by Daniel W. Bromley, this paper divides the institutional changes into four sub-changes of institutions, that is, that changes of property rights, market institutions, distribution institutions and the institutions of reform and opening-up. Variables that can replace the four changes will be searched for a quantitative research. Therefore, the change of the non-nationalization degree of economic components is treated as a replacement for the property rights. On the basis of others' research on marketing, this paper designs a system of indicators that can be used to calculate China's marketing degree. The "first proportion" in financial distribution is used as a replacement for the variable of the change of distributional institutions. And an indicator of China's of degree of reform and opening-up will be designed to study the changes of China's reform and opening-up degree.Based on the research on institutional changes, this paper further explores the contribution ratio of capital, label and technique to the increase of Chinese economy in terms of production function and H-P filtering. The empirical analysis shows that the increase of Chinese economy is mainly promoted by the increase of production factors, in which the contribution ratio of capital ranks the first, and institutional changes, labor and technique follow in turns. Additionally, the paper works out the potential increase ratio of each factor in the process of economic increase. By empirical analysis, it concludes that the increase of Chinese economy will not persist for a long time, and the quality of the economy is not high. The paper puts up empirical analysis between the institutional changes and the economic growth for example Zhejiang and Gansu province. At the same time, it is easier to understand the problems occurring in the process of institutional changes, such as the environmental worsening, the gap between the rich and the poor and so on. Also, this paper analyzes the problems occurring in the process of the institutional changes.In the analysis of these problems, the paper focuses on the problem of the gap between the rich and the poor, which is the prominent one in present society according to the related studies? By calculating and applying the Gini coefficient, the paper studies the present situation of the gap between the rich and the poor, and the influence of it on social stability and economic policy. The comparing and analyzing between Russia and India make it clear that the delaying of political institution change has been the most important cause hindering the economic increase.Through the theoretical analysis and the empirical study, the paper concludes that every factor plays a promotional role in economic increase during the process of institutional changes and still it can work much better. While institutional changes promote the increase of economy, it brings about some problems. If such kinds of problems can be avoided or solved as soon as possible, the potential of economic increase will be revealed to a larger extent.