China’s Economic Growth Prospects
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China’s Economic Growth Prospects

From Demographic Dividend To Reform Dividend

Cai Fang

In this book Cai Fang explores the contribution of demographic transition to economic growth in China’s reform period, depicts the population factors causing the economic slowdown since the second decade of the twenty-first century, analyses the challenges facing its long-term sustainability when the demographic dividend is disappearing, and proposes important policy remedies. He suggests that in order to avoid the middle-income trap, China's economic growth has to transform from an inputs-driven pattern to a productivity-driven pattern, which requires eliminating several institutional obstacles.
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Chapter 3: The Lewis Turning Point

Cai Fang


[T]he thought is always prior to the fact; all the facts of history preexist in the mind as laws. Each law in turn is made by circumstances predominant, and the limits of nature give power to but one at a time. (Emerson, “History”) While the very first indication of the change in China’s stage of economic development is the arrival of the Lewis Turning Point, the debate over whether or not it has arrived in China at all remains unsettled. With time, however, public and academic opinion is increasingly swinging in favor of a positive affirmation, but, even though China’s labor shortage and the wage inflation of ordinary workers have proven to be both undeniable and irreversible, scholars and policy researchers still disagree on the implications of such a change in the development stage. Some economists additionally reject the Lewisian theory of dual economy development in general, and further question its applicability to the Chinese economy in particular. For example, some scholars suggest that, in studying the transition of the Chinese economy, an alternative approach—that is, the neoclassical theory of economic development— should be used instead. Such studies not only criticize the Lewisian hypothesis of “zero marginal product of labor,” but also deny the existence of surplus labor in the Chinese economy (Ge and Yang, 2011).

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