An Economic History of Modern China

An Economic History of Modern China

Joseph C.H. Chai

As a country’s current development is path dependent, the rise of China and its strategic implications can only be understood in a historical context. Hence, the key to understanding contemporary China is the understanding of its past. So far there has been an absence of a comprehensive text dealing with Chinese economic history in the English language. An Economic History of Modern China fills this important gap, focusing on modern Chinese economic growth and comprehensively surveying the patterns of China’s growth experience over the past 200 years, from the Opium wars to the present day. Key events are traced back to their foundations in history to explain their impact on China’s modern economic growth.

Chapter 17: The Rise of China

Joseph C.H. Chai

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


RAPID GROWTH In its 30 years of reforms and open door strategy from 1979–2009, China achieved and maintained a spectacular real annual growth rate of GDP of nearly 10 per cent according to official statistics. However, official statistics overstate the growth rate because the gross domestic product (GDP) deflator used by China underestimates the actual rate of inflation for the period (Maddison 2007). On the other hand it is possible that the official growth rate is too low because it does not sufficiently take into account the service sector and product quality improvement (Perkins and Rawski 2008). Table 17.1 presents the official growth data and compares them with other estimates. It shows that the official data and estimates are fairly consistent, with the single exception of those by Maddison. However, with a growth rate between 9 and 10 per cent in the reform period China has achieved double the growth of the period from 1952 to 1978 (Perkins and Rawski 2008). And the comparison with China’s East Asian neighbours in their rapid growth periods shows that it outdid them all, as Table 17.2 shows. One of the reasons for this was, of course, China’s relative backwardness at the starting point of modern economic growth. The greater this is – measured in terms of GDP per capita as percentage of that of the world’s most advanced country, the USA – the faster latecomers can grow because they are able to borrow and adopt advanced technologies. Table 17.3 compares China’s per capita income...

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