Issues and Aspects of Development, Growth, Trade and Investment
Edited by Tran Van Hoa
Chapter 9: Can China sustain fast economic growth? A perspective from transition and development
Mei Wen 1 INTRODUCTION China has attracted worldwide attention during the past two decades with an average annual GDP growth rate of 9·95 per cent. However, after a soft landing of the economy from 1995 to 1997,1 a lasting expansionary fiscal policy which started in 1998 has not yet stimulated a new round increase of non-state investment and an expansion of domestic consumption. The modest decrease of the GDP growth rate from 12·6 per cent in 1994, 10·5 per cent in 1995, to 9·6 per cent in 1996, 8·8 per cent in 1997 and to 7·8 per cent in 1998 has caused many worries to the Chinese government and global economists. Krugman (1994) once pointed out that even a modest slowing in China’s growth will change the geopolitical outlook substantially. Furthermore, many optimists have turned to pessimists after the soft landing from 1995 to 1997. Hence there are wide concerns about whether China can sustain its fast growth. What will China’s growth perspective be? To address this issue, we need to review the determinants of China’s economic growth in the past two decades. In interpreting China’s economic development, many economists regard the high growth as indicating the success of its piecemeal economic reform characterized by management decentralization, market formation, gradually strengthened competition, opening of the economy, financial source shift and ownership diversification.2 Yet some economists such as Sachs and Woo (1997) attribute China’s fast growth to her initial conditions as an agrarian society...
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