China: A New Model for Growth and Development

China: A New Model for Growth and Development

Ross Garnaut
Cai Fang
Ligang Song
Volume: China Update 2013
Copyright Date: 2013
Published by: ANU Press
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  • Book Info
    China: A New Model for Growth and Development
    Book Description:

    The Chinese economy is undergoing profound change in policy and structure. The change is necessary to increase the value of growth to the Chinese community, and to sustain growth into the future. The changes are so comprehensive and profound that they represent a new model of Chinese economic growth. This book describes the replacement of an old uninhibited investment expansion model of growth, by transition to modern economic growth and provides insights into recent changes and where they are likely to lead. These include requirements for building the new institutions including its public finances for future growth, adjustments in its savings, industry and agriculture, changes in its demographic structure, business environment, and pattern of rural-urban migration, prospects for ‘green growth’, its energy policy trilemma and the climate change mitigation strategy, and changes for China’s interaction with the international economy through its overseas investment and trade in high tech products. China’s adoption of a new model of economic growth is of immense importance to people in China and everywhere. This book is an early attempt to take a close look at many of the features of the new model.

    eISBN: 978-1-921666-49-0
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Tables
    (pp. vii-x)
  4. Figures
    (pp. xi-xiv)
  5. Contributors
    (pp. xv-xvi)
  6. Acknowledgments
    (pp. xvii-xviii)
  7. 1 China’s New Strategy for Long-term Growth and Development: Imperatives and Implications
    (pp. 1-16)
    Ross Garnaut, Cai Fang and Ligang Song

    The Chinese economy is undergoing profound change in policy and structure. The change is necessary to increase the value of growth to the Chinese community, and to sustain growth into the future. The change is being driven partly by economic pressures that are emerging naturally from successful economic development, as labour scarcity and rapid increases in real wages change patterns of resource allocation, income distribution, environmental impact, and rates of economic growth, savings, investment and international capital flows. These changes that have emerged from the success of old patterns of growth are being reinforced by changes in national policy to...

  8. 2 New Institutions for a New Development Model
    (pp. 17-34)
    Dwight H. Perkins

    If China’s economy and per capita income is to continue to catch up to the levels of the world’s high-income economies, China will require a different approach from the model that has dominated its extraordinary development over the past three plus decades. The model of the past in essence involved three basic components during these three decades, and a fourth component during the most recent decade. The first component involved the dissolution of the Soviet-style system of centrally planned command economy and collective agriculture and replacing it with an economic system governed to a large degree by market forces. The...

  9. 3 The New Normal of Chinese Development
    (pp. 35-54)
    Yiping Huang, Cai Fang, Peng Xu and Gou Qin

    China’s economic performance during the reform period is sometimes described as a miracle (Lin et al. 1995). Its GDP per capita increased from US$220 in 1980 to US$6,000 in 2012. Not only is it now the world’s second largest economy, but it also contributes at least one-third of global economic growth in recent years. China is already a major player in global markets for luxury goods, labour-intensive manufacturing exports, commodities and foreign exchange. Many economists are optimistic that China can continue its rapid economic growth, albeit at a somewhat slower pace, in the coming decades (Perkins and Rawski 2008; Lin...

  10. 4 The End of China’s Demographic Dividend: The Perspective of Potential GDP Growth
    (pp. 55-74)
    Cai Fang and Lu Yang

    The unprecedented economic growth in China over the past 30 years can be attributed largely to the demographic dividend. That is, growth of the working age population guarantees an adequate supply of labour; a decline in the dependence ratio (the ratio of the dependent population to the working age population) helps to maintain a high savings rate, which is the condition for capital formation; and an unlimited supply of labour prevents return on capital from diminishing, which allows heavy investment to be the main source of GDP growth (Cai and Zhao 2012).

    As is well documented (e.g. Bloom and Williamson...

  11. 5 Chinese Industrialisation: Path Dependence and the Transition to a New Model
    (pp. 75-96)
    Huw McKay and Ligang Song

    China’s economic structure can be characterised as both over-industrialised and under-urbanised relative to its level of income per head. Further, for such a large economy, it is highly export oriented. The design of any new growth model will need to respect these major structural legacies. The ‘over-industrialised’ assessment reflects a high proportion of secondary activity in gross value added relative to its peers; and the under-urbanised assessment reflects the fact that the policy framework has prevented internal rural–urban migration from progressing at the rate at which push and pull motivations alone would have predicted. Furthermore, the absorptive capabilities of...

  12. 6 China’s Saving and Global Economic Performance
    (pp. 97-124)
    Rod Tyers, Ying Zhang and Tsun Se Cheong

    During the past decade, China’s excess saving became a major source of finance for the high levels of net debt in the industrialised world. Indeed, after 2005 and, particularly, in the immediate aftermath of the GFC it became the dominant single source. Yet China’s net saving abroad has been slowing as domestic debt rises and both its current account surplus and its rate of foreign reserve accumulation contract. The slower and more ‘inward focused’ growth prospects for China (Tyers 2012) will further reduce its excess saving over time. Combined with a similar trend in Japan, this brings an end to...

  13. 7 Growing into an Innovative Economy: Evidence from Chinese Firm-Level Data Analysis
    (pp. 125-146)
    Yixiao Zhou

    Since initiating market reforms in 1978, China has undergone a significant economic transformation (Lin 2011). A more recent development is that China now aims to become a knowledge-intensive economy. This goal may constitute a part of the force that drives the redistribution of knowledge in the international market (Serger and Breidne 2007). The following question, proposed by Jones and Romer (2010: 231), may become increasingly relevant:

    China’s population is roughly equal to that of the United States, Europe, and Japan combined. Over the next several decades, the continued economic development of China might plausibly double the number of researchers throughout...

  14. 8 China’s Agricultural Development: Achievements and Challenges
    (pp. 147-178)
    Li Zhou

    The development of the agricultural sector plays an important role in the Chinese economic transformation during the reform period (1978–2012). First, the rural reform centring on the household production responsibility system has increased agricultural output and productivity, lifting millions of people out of absolute poverty since the late 1970s. Second, increased productivity in the agricultural sector, coupled with institutional reform allowing the mobility of rural labour force, has led to unprecedented and large-scale rural–urban migration, permitting China to enjoy the effects of a tremendous ‘resource shift’ to enhance its economic growth.¹ Third, in the past 30 years, the...

  15. 9 Rural–Urban Migration: Trend and Policy Implications (2008–2012)
    (pp. 179-198)
    Xin Meng

    Over the past 20 years China has experienced unprecedented economic growth. During this period rural to urban migration has increased from 39 million in 1996 to 159 million in 2011 (NBS 2012). Migrants have contributed significantly to China’s economic miracle. It is foreseeable that rural–urban migration in China will continue to grow, together with China’s economic maturity in the next decades to come. A systematic record of the migration movement has, however, been lacking. As an exception, over the past five years the Rural–Urban Migration in China (RUMiC) project has been monitoring the changes in the rural–urban...

  16. 10 Reforming China’s Public Finances for Long-term Growth
    (pp. 199-220)
    Christine Wong

    In a modern state, the government performs three main functions: resource allocation—including the provision of public goods such as national defence, internal order and a legal system; the redistribution of income—including the provision of social protection and safety nets; and macroeconomic stabilisation. To finance these functions, the government raises revenues, and its ability to do so fluctuates with the size of the economy and its rate of growth. Since the global financial crisis in 2008, the general public has gained a greater appreciation of how important public finances are to a nations’ well-being, affecting both its economic growth...

  17. 11 Changing Business Environment in China: A Regional Context and Policy Implications
    (pp. 221-250)
    Xiaolu Wang, Jingwen Yu and Fan Gang

    China’s business environment is constantly changing in response to developments in markets, external conditions and government policies that have resulted from China’s move towards a market-oriented economy. Improving the business environment is a key policy objective, as changes in that environment affect the behaviour and operations of firms, especially those private firms that are subject to policy and institutional constraints. A much improved business environment in terms of the market and legal environment, fair competition, access to finance, supply of human resources, taxation and infrastructure development will, therefore, not only facilitate business activities, but also, in an important way, nurture...

  18. 12 Will Chinese Industry Ever Be ‘Green’?
    (pp. 251-266)
    Shiyi Chen and Jane Golley

    In January 2013, as air pollution reached record levels in much of eastern China, Chinese multimillionaire Chen Guangbiao sold cans of air on the street in smog-ridden Beijing to send a simple message: ‘I want to tell mayors, county chiefs and heads of big companies: don’t just chase GDP growth, don’t chase the biggest profits at the expense of our children and grandchildren and at the cost of sacrificing our ecological environment’.¹ As a temporary response to the ‘hazardous’ air quality in Beijing, with particulate matter readings reaching over 40 times those considered safe by the World Health Organisation, the...

  19. 13 Can China Achieve Green Growth?
    (pp. 267-280)
    Yongsheng Zhang

    In 1978, after over 100 years of decline, China embarked on a journey to restore its status as the world’s largest economy. From the early 1500s until the early 1800s, China’s economy was the world’s largest. By 1820, it accounted for one-third of the world’s gross domestic product (GDP). The next two centuries, however, were tumultuous for China. The country experienced catastrophic decline between 1820 and 1950 and then, starting in 1978, it experienced meteoric rise (Maddison 2001). After reform and opening up in 1978, China started to catch-up with the western world with an average of 10 per cent...

  20. 14 China’s Climate Change Mitigation in International Context: Issues for Australia and China
    (pp. 281-300)
    Ross Garnaut

    As the Chinese National Development and Reform Commission (NDRC) observes in its first survey of Chinese climate change policies, ‘China is one of the countries most vulnerable to the adverse impact of climate change’ (NDRC 2012).

    It shares that reality with Australia, for which the extreme heat and bushfires of early 2013 join increasingly common extreme weather events that carry a climate change footprint.

    We are two of the most vulnerable countries, but we share vulnerability with the whole of humanity. Extreme weather events have become more common and severe on all continents. Some of the manifestations of more common...

  21. 15 China’s Energy Demand Growth and the Energy Policy Trilemma
    (pp. 301-320)
    Simon Wensley, Stephen Wilson and Jane Kuang

    China’s remarkable pace of development and transformation in recent decades has been well documented, analysed and discussed. In less than 25 years, from 1985 to 2008, China’s GDP per capita increased more than fourfold. The path between comparable levels of development took half a century in Japan (1916 to 1967), a century in Germany (1856 to 1958) and the United States (1840 to 1940), and 120 years in the United Kingdom (1820 to 1940) (Shell 2013).

    Yet, China is only now just reaching world average levels of energy and economic development. And, outside China’s coastal provinces and major cities, energy...

  22. 16 Financial Constraints on Chinese Outward Direct Investment by the Private Sector
    (pp. 321-340)
    Bijun Wang, Miaojie Yu and Yiping Huang

    China’s outward direct investment (ODI) has become a worldwide phenomenon in recent years, having increased from $2.85 billion in 2003 to $74.65 billion in 2011 in flow terms, and jumped from $29.9 billion to $424.8 billion in stock terms during the same period. China, following the United States, Japan, United Kingdom, France and Hong Kong, was in 2011 the sixth-largest ODI investor in the world, and the largest in developing countries.

    State-owned enterprises (SOEs) are currently the major players in Chinese ODI, albeit their relative importance is declining (Wang and Huang 2012a). Wholly state-owned unincorporated enterprises devoured 66 per cent...

  23. 17 Determinants of Chinese Exports in Information and Communication Technology (ICT) Products: A Firm-Level Analysis
    (pp. 341-362)
    Kunwang Li and Bingzhan Shi

    As information and communication technology (ICT) products are becoming more common in society, the development and diffusion of ICT, because of its high-tech content, has been widely seen as a major contributor to the growth of productivity, and economic growth more generally. First, ICT is known as a key tool for enhancing innovation, and promoting technological progress, resulting in the growth of total factor productivity (TFP) in the ICT sector itself. Second, firms tend to be engaged in large-scale investment in ICT in capital formation to improve productivity. The two factors together constitute the direct contributions made by ICT to...

  24. Index
    (pp. 363-370)