The Future of the Chinese Economy: Four Perspectives

ABSTRACT

This article studies the future prospect of the Chinese economy using four different perspectives: neo-classical, Marxian, world-system and climate stabilisation. While the neo-classical perspective suggests that China can maintain a relatively decent pace of economic growth for decades to come, the Marxian analysis finds that the Chinese economy will confront a major crisis in the coming years due to internal contradictions of capitalist accumulation. The world-system analysis suggests that there has been a “ceiling of development” that historically has limited the scope of development for the great majority of the world population and China will hit this “ceiling of development” within about a decade. Moreover, if China were to fulfil its climate stabilisation obligations, it may prove to be impossible for the current system to maintain economic and political stability.

KEYWORDS:

• China
• capitalist world system
• economic growth
• crisis
• climate change
• Marxism

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes

1. For an introduction to the neo-classical theory of economic growth, see Mankiw (2007, 187–251). Most neo-classical analyses of economic growth today would separate the contribution of human capital to economic growth from the rest of the total factor productivity contribution. The empirically estimated human capital contribution is usually small. In this article, for simplicity, the contribution of human capital is treated as a part of the overall total factor productivity contribution.

2. For example, OECD Observer commented that China’s “extraordinary economic performance has been driven by changes in government economic policy that have progressively given greater rein to market forces” (Herd and Dougherty 2005, 13). On the other hand, in a recent report, Goldman Sachs warns that China may suffer from sharp declines in its long-term growth prospect if the Chinese government fails to implement necessary “reforms” such as further “consolidation” of state-owned enterprises, land privatisation and financial liberalisation (Mossavar-Rahmani et al. 2016). For a collection of neo-classical views on China’s economic growth, see Brandt and Rawski (2008).

3. On the argument that the Chinese economy today is dominated by capitalist relations, see Burkett and Hart-Landsberg (2005); Li (2008); and Foster and McChesney (2012).

4. In China’s official statistical definitions, the so-called state-controlled enterprises or state-controlled units refer to any economic unit where the state is the single largest equity holder. In other words, even in the “state-controlled enterprise” or “state-controlled units,” the state’s equity stake may not exceed 50%.

5. In the popular literature on the Chinese economy, asset price bubbles and surging debt are often cited as major economic concerns. From the Marxian perspective, asset bubbles and rising debt levels are more related to the surface of economic phenomena, reflecting rather than causing the underlying contradictions of capitalist accumulation. From a purely technical point of view, what level of debt shall be considered unsustainable and what macro-economic consequences will result from the collapse of asset bubbles, especially in the Chinese context, remain subjects of debate among both mainstream and non-mainstream economists. It should also be noted that neo-classical economists often blame China’s rising debt levels on the supposedly inefficient state-owned enterprises and use it as an excuse to promote privatisation and liberalisation (see Mossavar-Rahmani et al. 2016).