Skip to Main Content
Have library access? Log in through your library
China: The Next Twenty Years of Reform and Development

China: The Next Twenty Years of Reform and Development

Ross Garnaut
Jane Golley
Ligang Song
Volume: 2010
Copyright Date: 2010
Published by: ANU Press
  • Cite this Item
  • Book Info
    China: The Next Twenty Years of Reform and Development
    Book Description:

    China has made some remarkable achievements during the first three decades of  economic reform and opening up, rising to become one of the world's most dynamic and globally-integrated market economies. Yet there remains much unfinished business on the reform and development agenda, coupled with newly emerging challenges. China: The Next Twenty Years of Reform and Development highlights how the deepening of reforms in critical areas such as domestic factor markets, the exchange rate regime and the health system, combined with the strengthening of channels for effective policy implementation, will enable China to cope with the challenges that lie ahead. These include responding to the pending exhaustion of the unlimited supply of labour; playing a constructive role in reducing global trade imbalances; enhancing firms' ability to innovate; coping with migration, urbanisation and rising inequalities on scales unknown in world history; and dealing with rising energy and metal demand in an era in which low-carbon growth has become a necessity rather than a choice. Chinese Translation

    eISBN: 978-1-921666-29-2
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-xii)
  3. Abbreviations
    (pp. xiii-xvi)
  4. Contributors
    (pp. xvii-xx)
  5. Acknowledgments
    (pp. xxi-xxii)
  6. 1. Chinese economic reform and development: achievements, emerging challenges and unfinished tasks
    (pp. 1-16)
    Jane Golley and Ligang Song

    The economic transformation that has taken place in China since the late 1970s is now regarded as one of the most significant social changes in human history. Within just three decades, China has succeeded in transforming itself from a centrally-planned closed economy into one of the world′s most dynamic and globally-integrated market economies. The dynamics unleashed by Deng Xiaoping′s reforms, open-door policies and institutional changes have unleashed enormous entrepreneurial energy and propelled continuous capital accumulation, productivity gains and trade and income growth on a scale the world has never seen before. During this period, China′s total gross domestic product (GDP),...

  7. Part I Long–Term Development:: Trends and Issues

    • 2. The turning period in China′s economic development: a conceptual framework and new empirical evidence
      (pp. 19-38)
      Ross Garnaut

      China began its era of market reform and sustained strong growth in 1978 as a labour-surplus economy. The rapid growth of the modern industrial economy could be supplied with all of the unskilled labour that it wanted to use at a more or less steady real wage. This supported the familiar characteristics of China′s economic development in the later reform period: rapid expansion of exports of relatively labour-intensive goods; rising ratios of savings and investment to gross domestic product (GDP); eventually a tendency towards surplus in trade and current external payments; and increasing inequality of income distribution.

      There is now...

    • 3. China model and its future
      (pp. 39-52)
      Yang Yao

      The Chinese economy′s average growth rate of 9.7 per cent per annum from 1978 to 2008¹ places China among just 13 successful economies that have managed to grow at a rate of 7 per cent or higher for 25 years or more since World War II (The Growth Commission 2008). Per capita gross domestic product (GDP) has grown by a factor of 12 in real terms to reach US$3400 in 2008.² During this period China moved from a planned economy to a ′mixed economy′ with the private sector now accounting for two-thirds of national GDP. How has China managed this...

    • 4. How will China′s central–local governmental relationships evolve? An analytical framework and its implications
      (pp. 53-72)
      Yongsheng Zhang

      The way in which intergovernmental relationships evolve in China is crucial for China′s future development. There has been a worldwide trend towards decentralisation of power and responsibilities in large countries since the 1980s. Nonetheless, decentralisation does not necessarily mean a weakened capability of the central (or federal) government to control the behaviour and actions of local governments.

      From a fiscal perspective, decentralisation has three related dimensions: responsibility for expenditure; responsibility for raising revenue; and intergovernmental fiscal transfer payments. For each level of government, the relationship between these three items is: expenditure = own-source revenue + intergovernmental fiscal transfer payments.


    • 5. China′s metal intensity in comparative perspective
      (pp. 73-98)
      Huw McKay, Yu Sheng and Ligang Song

      This chapter has two aims. The first is to reinvigorate the theoretical field that relates economic development to metal usage, which has been lying fallow for considerable time. The second is to shed light on China′s future path of ferrous metal demand by referencing the experience of relevant peers over the entire course of the industrialisation process.

      In the past decade, a great deal of effort has gone into long-run forecasting projects in the realm of diet (FAO 2002, 2006), agriculture, food supply and water (Bruinsma 2009), energy (McKibbin 2006), carbon emissions (Garnaut et al. 2008; UNDP 2010) and automobiles...

    • 6. Assessing China′s energy conservation and carbon intensity: how will the future differ from the past?
      (pp. 99-126)
      ZhongXiang Zhang

      China′s spectacular economic growth since 1978 has been heavily dependent on burning dirty coal. This has given rise to unprecedented environmental pollution and health risks. On top of these domestic environmental stresses, projected global climate change is expected to pose additional threats to China in the foreseeable future.

      As the world′s largest emitter of carbon dioxide, China is facing great pressure inside and outside international climate negotiations to be more ambitious in combating climate change. China cannot afford to continue on the conventional path of encouraging economic growth at the expense of the environment, whether it looks at the issue...

    • 7. Prospects for diminishing regional disparities
      (pp. 127-150)
      Jane Golley

      In the three decades since Deng Xiaoping declared that China′s economic development would necessarily involve some people becoming rich before others, inequalities have risen steadily across (and within) China′s provinces and regions. To some extent, this outcome has been the natural consequence of market forces in a large developing economy in which the numerous historical and geographical advantages of the eastern region ensured that industrialisation would occur there ahead of the rest of the country. Deng′s Open Door Policy and, later, the Coastal Development Strategy, compounded these advantages with a range of preferential policies that explicitly promoted the development of...

  8. Part II: Global Integration:: Challenges and Opportunities

    • 8. Exchange rate policy and macroeconomic adjustment
      (pp. 153-162)
      Geng Xiao

      The debate over the exchange rate between the renminbi (RMB) and the US dollar is usually framed in terms of global imbalances: excessive US consumption beyond its savings on the one hand and excessive Chinese production and savings beyond its own spending on the other. This quickly leads to the view that the United States should export and save more and China should import and spend more. The debate centres on how to achieve this rebalancing. The focus in the West is on short-term appreciation of the renminbi, while the emphasis in China is on longer-term structural and institutional reform...

    • 9. The real exchange rate and the renminbi
      (pp. 163-192)
      Rod Tyers and Ying Zhang

      China′s renminbi (RMB) has been at the centre of political debates over current account imbalances for more than a decade. In scholarly circles, while a few, including McKinnon (2006), argue that a renminbi appreciation would not address the imbalances of concern to the United States, numerous studies have supported the view that the currency is undervalued—by margins ranging from ′small′ to as high as 50 per cent¹—and some conclude that a unilateral appreciation of the renminbi is essential (for example, Cline 2005). Expectations that China′s exchange rate should be appreciating are based commonly on the Balassa (1964) –...

    • 10. China and East Asian trade: the decoupling fallacy, crisis and policy challenges
      (pp. 193-220)
      Prema-chandra Athukorala and Archanun Kohpaiboon

      The ′decoupling′ thesis—the notion that the East Asian region has become a self-contained economic entity with the potential for maintaining its own growth dynamism independent of the economic outlook for the traditional industrialised-market economies—was a popular theme in Asian policy circles in the first decade of the new millennium until the onset of the recent global financial crisis.¹ The empirical basis for this was provided by studies of trade patterns based on readily available trade data, which revealed a continuous increase in trade among the countries in the region (intra-regional trade) since the late 1980s—a process that...

    • 11. Asian foreign direct investment and the ′China effect′
      (pp. 221-240)
      Chunlai Chen

      Since the 1990s and especially after China′s accession to the World Trade Organisation (WTO), China has become one of the most-favoured destinations for foreign direct investment (FDI). In 2008, FDI inflows into China reached US$92.4 billion. In 2009, despite the global economic recession, which severely affected world FDI flows, China still attracted US$90 billion of FDI inflows. By the end of 2009, China had attracted a total of US$760 billion in FDI inflows,¹ making it by far the largest FDI recipient among the developing countries in the world.

      There are, however, increasing concerns that China′s FDI success has been excessive,...

    • 12. The global financial crisis and rural–urban migration
      (pp. 241-266)
      Sherry Tao Kong, Xin Meng and Dandan Zhang

      Since the second half of 2008, the global financial crisis (GFC) reduced export orders sharply and led to a decline in China′s economic growth. As China′s exporting industries are labour intensive and most likely to employ rural migrants, it is widely believed that the global financial crisis has had significant negative impacts on the employment and/or wages of rural migrants. At the height of the crisis, laid-off Chinese migrant workers protested outside closed factories and millions lamented lost jobs and embarked on journeys home much earlier than the usual Chinese New Year visit. Many were apprehensive, worrying that the worst...

  9. Part III; Policy and Reform:: Unfinished Business

    • 13. Avoiding economic crashes on China′s road to prosperity
      (pp. 269-292)
      Wing Thye Woo

      There is a long tradition of predictions of gloom and doom among China economists. For example, in the mid 1990s, Nicholas Lardy (1998) of the Peterson Institute for International Economics started highlighting the de facto insolvency of the Chinese banking system with the implication that a bank run leading to financial-sector ruin was a strong possibility in the medium term. The twenty-first century began with the claim by Gordon Chang (2001) that China′s imminent accession to the World Trade Organisation (WTO) would cause such widespread unemployment within China′s already alienated population that the country′s economic and political systems would collapse....

    • 14. Rebalancing China′s economic structure
      (pp. 293-318)
      Yiping Huang and Bijun Wang

      Chinese Premier, Wen Jiabao, warned in early 2010 that ′the Chinese economy is still imbalanced, inharmonic and unsustainable′. This is not the first time that Premier Wen has expressed concerns about growth quality. He first raised the issue when he took office in 2003 and repeated the warning when the economy showed signs of overheating in 2007. It is probably fair to rank transformation of the growth model as one of the top policy priorities under Wen′s government.

      Indeed, despite its continuous success maintaining strong growth, the Chinese economy has exhibited worsening structural imbalances in recent years. Some of the...

    • 15. Urbanisation with Chinese characteristics
      (pp. 319-340)
      Cai Fang and Meiyan Wang

      It is universally acknowledged by economists that agricultural shares in aggregate output and the workforce tend to decline as an economy grows. Economists agree, however, only on the existence and inevitability of this phenomenon as a result of general economic growth, while arguing about questions such as how the transformations of production and employment happen during the economic development process, what characterises each stage of the transformation and what changes are indicative in the transformations. In China, there is little agreement on the way these transformations take place from either a theoretical or an empirical perspective, for the following reasons....

    • Indigenous innovation for sustainable growth
      (pp. 341-362)
      Yanrui Wu

      After three decades of rapid growth, the Chinese economy is now at the crossroads heading to the next phase of development. While China′s economic growth has indeed been phenomenal, it has also been resource intensive and environmentally damaging. To sustain high growth in the coming decades, the role of technological progress has to be boosted. Technological progress within a country can be due to technology transfer from abroad or indigenous innovation. The former has been widely discussed in the literature on the Chinese economy. For example, Wei and Liu (2006) examine productivity spill-overs from exports and foreign direct investment (FDI)...

    • 17. China′s health system and the next 20 years of reform
      (pp. 363-400)
      Ryan Manuel

      Health care in China remains a topic of great popular discontent, particularly in rural areas, despite a raft of recent reforms and an unprecedented splurge in government health spending, The common phrase ′kanbing nan, kanbing gui′ (seeing a doctor is hard, and expensive) summarises succinctly the issues facing many Chinese citizens with regard to health care.

      Analysing the future of the Chinese healthcare system requires some historical context. This chapter will divide the Chinese healthcare reform experience into three distinct periods. The first is the collective period, defined as the period 1950–79. Due to its efficient public finance system...