What can be learned from China’s success?

This paper is based on a presentation made to the G20 Summit Think Tanks meeting organised by Chongyang Institute for Financial Studies, Renmin University of China in Beijing on 3 September 2014.

This manuscript is an extended version of the paper first published as a blog article at http://ablog.typepad.com/keytrendsinglobalisation/2014/11/what-the-g20-should-learn-from-china.html.

Abstract

Since 1978, China has experienced the most rapid economic growth of any country in world history, and the most rapid growth in living standards of any major economy. Following the latest international financial crisis, China outperformed any other major economy – from the second quarter of 2007 to the second quarter of 2014, China’s economy grew by 78% and the USA by 8%. In a single generation, China has gone from a ‘low income economy’ to the verge of achieving ‘high income’ status by World Bank criteria. Achieving this would double the population living in ‘high income’ economies globally. This extremely rapid development is sometimes explained in terms of unique ‘Chinese characteristics’, but research over the last 30 years suggests it is rooted in universal economic processes. While the combination of global forces producing economic growth is unique in China and produces unique ‘Chinese characteristics’, they can operate throughout the world economy. If other developing economies could achieve the scale of China’s economic success, global problems of poverty and its consequences would be solved. China’s policy response to the international financial crisis was far more effective than that of other major economies. This paper examines the chief strategic lessons to be drawn from China’s success.

Keywords:

• Chinese economy
• economic growth
• developing economies
• TFP

Notes

This paper is based on a presentation made to the G20 Summit Think Tanks meeting organised by Chongyang Institute for Financial Studies, Renmin University of China in Beijing on 3 September 2014.

This manuscript is an extended version of the paper first published as a blog article at http://ablog.typepad.com/keytrendsinglobalisation/2014/11/what-the-g20-should-learn-from-china.html.

1. This is of course rapid growth by the standards of the period.

2. Calculated from (The Conference Board 2014) calculated in EKS PPPs.

3. The different categories with ‘Chinese characteristics’ are from (Wen 2011). The term ‘China Dream’ is of course from Xi Jinping.

4. (Deng X., 30 March 1979, p. 173) Equally, Deng Xiaping spoke of the ‘universal truth of Marxism-Leninism’ (Deng X., 2 June 1978). This insistence that China acted simultaneously in accord with its specific conditions and universal laws was continuously asserted by Deng Xiaoping in numerous different contexts. For example:

‘Our principle is that we should integrate Marxism with Chinese practice and blaze a path of our own. That is what we call building socialism with Chinese characteristics’ (Deng X., 21 August 1985).

‘The Chinese revolution succeeded by integrating the universal principles of Marxist–Leninism with the concrete practice of China’ (Deng X., 31 May 1980).

‘The Chinese revolution succeeded by integrating the universal principles of Marxist–Leninism with the concrete practice of China, we should not demand that other developing countries, let alone the developed capitalist countries, adopt our model in making revolution. Of course, one cannot demand that they all adopt the Russian model, either’.

‘We were victorious in the Chinese revolution precisely because we applied the universal principles of Marxist–Leninism to our own realities’ (Deng X., 28 August 1985).

‘Comrade Mao Zedong successfully integrated the universal principles of Marxist–Leninism with the realities in China’ (Deng X., 13 October 1987).

5. For an extended analysis of some of these major changes, see (Jorgenson 2009).

6. For a conceptual explanation of the changes, see Dale W. Jorgenson (2009). For detailed technical studies, see OECD (2001, 2009).

7. See for example (Zheng, Bigsten and Hu 2009). The whole framework of this is a false assumption that the majority of world economic growth is due to productivity increase.