China’s Economic Development
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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.
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Chapter 3: Urban and rural economic development during the process of urbanization and industrialization

Institutions, Growth and Imbalances

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


As depicted in the painting of the Qingming Festival Riverside, China’s ancient streets and metropolises have always been crowded with people. According to the historical record, ancient China’s urban development was ahead of Europe’s. The handicraft industry in the cities of Hangzhou, Suzhou, and Chengdu thrived during the Song Dynasty. Hangzhou, the capital of the Southern Song, had 1.5 million people, and the service industry was very important. At the end of the thirteenth century, Marco Polo came to China, and he was astonished at Suzhou’s large size – the city then covered an area of 4 square miles and was densely populated – and at Hangzhou’s beauty and prosperity. In modern times, China has been relatively undeveloped with respect to urbanization and urban development. Since the beginning of China’s reform and opening-up in 1978, its economic development has taken the form of urbanization and industrialization, which are important indicators of the efficiency of modern social and economic development. Ancient people gathered in cities and participated in the handicraft and service industries, where the urban layout allowed them to work more efficiently through an agglomeration effect. For a long time, China relied on Lewis’s (1954) dual economy theory to direct its urban and rural economic development.

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