China’s Economic Development

China’s Economic Development

Institutions, Growth and Imbalances

Lu Ming, Zhao Chen, Yongqin Wang, Yan Zhang, Yuan Zhang and Changyuan Luo

The authors identify three major factors in the growth of the Chinese economy: economic decentralization and political centralization; the urban–rural divide; and relational society. These are explored in depth via analyses of factors including urban and rural economic development and their political and social foundations, industrial agglomeration, transitions of public services and governmental responsibilities towards them and developmental imbalances and mechanisms. It is illustrated that whilst contemporary China has obviously made great economic strides, a wide variety of problems are accumulating over time. The book concludes that following three decades of high economic growth, China now faces great challenges for sustainable growth, and the institutions of China’s economy have reached a critical point. Strategies for dealing with these challenges and requirements for the successful future development of China are thus prescribed.

Chapter 2: Political and social foundations of economic development

Lu Ming, Zhao Chen, Yongqin Wang, Yan Zhang, Yuan Zhang and Changyuan Luo

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics

Extract

During the 30 years that have passed since China first introduced its reform and opening-up policies, its economy has developed rapidly. China’s economic miracle has received increasing levels of recognition from the international community, and economists continue to explore its possible causes and implications. To understand the development of China as a large country, we must first understand the behavior of the local governments. In a large country, the central government faces enormous governance costs. China’s central–local relationship involves economic decentralization. Politically, China espouses unified leadership in order to execute policies effectively and ensure the political unification of the country. As early as 10 years ago, it became clear to many economists that China’s economic performance had outstripped Russia’s. Economic decentralization and political centralization are both considered important causes of China’s economic success (Blanchard and Shleifer, 2001). The uniqueness of the Chinese economic system can be traced back to the period of planned economy, when China basically copied the Soviet Union’s economic system. However, China paid more attention to the initiative of the local authorities rather than emphasizing the accuracy of central plans, as in the Soviet Union. It could be said that decentralization began shortly after the foundation of the People’s Republic of China, even though it changed over time.

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