The Engine Of China's Economic Transition And Its Factors

As economic globalization goes deeper,countries all over the world are getting closer,technology diffusion is happening more rapidly,technology exchanges is becoming more frequently,the co-opetition relationship between countries is more noticeable.The international status of a country goes hand in hand with its level of economic development.At this very moment,China is at a critical transitional stage,with the slower economic growth and more pressure of the economic downturn.China is working hard to put economic development onto the track of endogenous growth driven by innovation rather than by capital accumulation.According to Neo-economic Growth Theory,Total Factor Productivity(TFP)is the crucial source of the long-run economic growth as well as the key measurement of economic growth quality.Besides,TFP is the most important engine of China's economic transition.Thus,understanding the sources of TFP growth is a relevant issue for growth researchers and policy makers.This article examines the key factors that determining the TFP growth and its share to economic growth at the economic transitional stage in China.Data from 1999 to 2014 for 30 economic units excepting Xi Zang Province are utilized to build a Dynamic Panel Data Model in the analysis.The empirical work shows that the drivers of TFP growth can be divided into the external channel and internal channel.The external channel is that China actively participates in the international division of labor and international trade to share global dividends.While the internal channel means China has a higher resource allocation efficiency in intellectual capital,human resources and financial market.This study finds evidence that the initial TFP conditions,openness to the world trade,the investment in intellectual capital,the level of human capital,as well as the financial market quality are very important determinants of the TFP growth.Firstly,there is a cumulative effect in TFP,the TFP condition in the previous period has a significant positive impact on the TFP growth in the current period.Secondly,in the short term,China's international trade can promote its TFP growth,but in the long run,its international trade might inhibit the TFP growth.Thirdly,the investment in intellectual capital,could contribute to the TFP growth in China both in the short term and in the long run.Fourthly,time-lag effect exists in human capital's function on TFP growth.At last,while China's financial market has a positive effect on TFP growth in the short term,it could harm the TFP growth in the long run.Besides,some policy implications are offered based on our results.Firstly,work hard to transform the economic development pattern and put emphasis on TFP growth.Secondly,improve the mode of trade growth,with focusing on long-term trade quality improvement.Thirdly,strengthen the research & development power to make the economy innovation-centered.Fourthly,optimize the allocation of human resources,and improve the incentive mechanism of the labor market.At last,make efforts to accelerate the reform of the financial system,improve the efficiency of the financial market.