An Analysis Of The Source And Mechanism Of Business Cycles In China

Cyclical business fluctuations not only occur in the developed capitalist countries, but also in the developing countries like China. Since the large-scale of economic constructions in 1953, Chinese macro-economy has been always operating in such continuous fluctuations.This paper aims to study the course of Chinese business cycles during the period 1953 to 2009. As is consented that there exists cyclical business fluctuations in the operation of Chinese macro-economy and there also displayed distinctive fluctuant characteristics in different historical periods. However, no theoretical system could offer a comprehensive explanation to expound the origin as well as mechanism of Chinese cyclical business fluctuations hitherto. Therefore, how to provide a theoretical framework within which is logically self-consistent becomes as an important issue to be resolved nowadays. This brand new proposition contains two tasks:first, how to comprehend the rule of China's macroeconomic cyclical fluctuations and how to explain its mechanism;Second, how to interpret the characteristics demonstrated by China's macroeconomic fluctuations.The origin of the economic cycle means the root cause that leads to economic system's fluctuations. And the mechanism refers to how the joint force formed by a series of associated power make the economic system unstable. Thus, here we propose the following three questions:Question 1: What is the origin of China's cyclical business fluctuations? Does the origin of China's business vibration during the progress of socialistic economic development differ from the origin of capitalistic countries'?Question 2: What is the mechanism of China's Economic Fluctuations? Is the mechanism of cyclical business fluctuations functioning distinctively in different stages of development?Question 3: What are the characteristics of China's business fluctuations and how does its rule evolve?The main body of this paper is constituted by three parts: literature research, theory construction and empirical analysis. 1. We set the mode of production as the starting point of our logic. With the interpretation of literatures concerning Marx and Engels's theory of economic crisis in capitalistic countries, we would describe the logical framework of this theory from an innovative perspective.2. We absorb the theoretical sources from Marx and Engels's classic original works and develop their ideas based on them. 1) Theoretically analyze modern mechanical industry's mode of production becomes as the origin of cyclical business fluctuations. 2) Construct a macroeconomic operation system composed of dual-subject and dual-object. Thoroughly interpret the mechanism of business fluctuations in China's different development stages from three aspects: the economic development strategy laid down by the government, relevant economic system as well as institutional power system orienting to determine the constituents of policies.3. As the guiding ideology based on the theoretical framework constructed in this paper, we would finally conduct an empirical analysis and study the course of China's cyclical business fluctuations from 1953 to 2009.This paper adopts the method with theoretical research and empirical analysis. It attempts to tentatively answer the three questions presented above.First, from a historical point of view, national economy was not born to fluctuate cyclically. It is only when the social mode of production turned into the modern mechanical industry's mode of production, the economy phenomena with cyclical business fluctuations would occur. The essence of natural linkage effects among every production process of modern mechanical industry's mode of production is the basic parts for this paper to analyze the issue. Theoretical analysis and constructed model show that the modern mechanical industry's mode of production is the origin of national economy's cyclical fluctuations. So this is the very answer to the first question we presented. As long as a country chooses to organize its social production in the form of modern mechanical industry's mode of production, it is bound to have cyclical business fluctuations. Therefore, China shares the same origin of cyclical business fluctuations as the capitalistic countries'during the process of socialistic economic constructions, which stems from the intrinsic nature of modern mechanical industry's mode of production.Next, we divided the economy system into the leading economy system with advanced production technology and the chasing economy system with laggard production technology. The characteristic differences of cyclical business fluctuations between them originate both from their systems'distinctiveness and their institutions'discrepancy. But this is not the focus of this paper. We concentrate on analyzing the cyclical business fluctuations of China, which maintains the chasing economy system. The mechanism is the joint force composed by a series of associated power. And this force comes from the national economic development strategy. This strategy along with its relative economic institutions and policies constitute the mechanism of cyclical business fluctuations. So this comes to the answer of our second question. In that the economic development strategy has changed, the mechanism and its characteristics in different periods would be relatively distinctive. Therefore, during the planned economic period, the disequilibrium development strategy, that advocated priority to heavy industries, and its related institutions and policies formed the Investment expansion-Industrial structural imbalance fluctuant mechanism. This mechanism led to the characteristics of shorter economic cycles but more drastic volatility in the planned economic period. After the reformation and opening, the more balanced development strategy spurred the national economy greatly and formed the Investment expansion-Credit out of control mechanism with the market-transitional institutions and policies. And the new mechanism generated longer cycles and the alternation of expansion and contraction owing to the conflicts between real economy and monetary economy. With the advent of new century, China has implemented the sustainable economic development strategy and constantly develops and improves the market economic system. By promoting economic entities chasing their own interests intensively and increasing global economic exchanges, China has totally involved in the world economic system. While the vulnerability to the external shocks would make the economy fluctuate. Thus, the Export expansion-External Shock mechanism has formed. In the new century, China's first round of the economic cycle appeared the characteristics of slow growth but steep descent.Finally, based on the constructed theoretical framework, we would have an empirical observation on the course of China's cyclical business fluctuations from 1953 to 2009. China's economic cycles are divided into nine rounds in accordance with their statistical characteristics. And we collect the facts of cyclical business fluctuations in different periods. There comes to our answer to the third question that the characteristic transformation of China's cyclical business fluctuations from the drastic volatility in planned economy period to operating and adjusting in a high level during the market-transitional period has evolved into an obvious empirical rule. As China is constantly expanding and deeply involved in international trade, it is inevitable to suffer the external shocks frequently. While the national reformation of market economic system is still on the stage of completing and developing. China's current conflicts between institutional power and market-operational power along with the unpredictable external shocks would constitute its future cyclical business fluctuant mechanism.