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The Rise of China as an Economic Power

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  • C Goodhart
  • Chenggang Xu
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    Abstract

    In the twenty years since the Cultural Revolution, China has maintained fast real growth. This occurred despite China having similar problems to other transitional economies, eg loss-making State Owned Enterprises (SOEs), eroding fiscal revenues and inflation, (Section 3). Although China initially adopted the Soviet central planning model, after the 1950s break Chinese planning changed towards a regionally-based system with local planning (Section 2). In contrast to the centrally-based, functionally-specialized (U form or unitary structure) Soviet model, the Chinese-economy is organized on a multi-layer-multi-regional (M form) basis. This encouraged development of small size township and village enterprises (TVEs), the main engine of Chinese growth. Power and control remained with the Party and the State, but was diffused much more widely, regionally and locally. This allowed initiatives at lower (political) levels to establish institutions, both in agriculture (the 'household responsibility system') and industry (TVEs), without state protection. Even among regionally controlled SOEs, 'tournament rivalry' between regions, etc, and between SOEs and TVEs provided competition.

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    File URL: http://cep.lse.ac.uk/pubs/download/DP0299.pdf
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    Bibliographic Info

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0299.

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    Date of creation: Jul 1996
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    Handle: RePEc:cep:cepdps:dp0299

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    Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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    References

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    1. Groves, Theodore, et al, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 183-209, February.
    2. McMillan, John & Naughton, Barry, 1992. "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy, Oxford University Press, vol. 8(1), pages 130-43, Spring.
    3. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 327-68, May.
    4. M Weitzman & Chenggang Xu, 1993. "Chinese Township Village Enterprises as Vaguely Defined Cooperations," CEP Discussion Papers dp0155, Centre for Economic Performance, LSE.
    5. Gary H. Jefferson & Thomas G. Rawski, 1994. "Enterprise Reform in Chinese Industry," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 47-70, Spring.
    6. Shang-Jin Wei, 1993. "Love and hate: state and non-state firms in transition economies," Pacific Basin Working Paper Series 93-10, Federal Reserve Bank of San Francisco.
    7. Ellman, Michael, 1994. "The Increase in Death and Disease under "Katastroika."," Cambridge Journal of Economics, Oxford University Press, vol. 18(4), pages 329-55, August.
    8. Sachs, J.D. & Woo, W.T., 1994. "Structural Factors in the Economic Reforms of China, Eastern Europe and the Former Soviet Union," Papers 94-01, California Davis - Institute of Governmental Affairs.
    9. Hussain, Athar & Lanjouw, Peter & Stern, Nicholas, 1994. "Income inequalities in China: Evidence from household survey data," World Development, Elsevier, vol. 22(12), pages 1947-1957, December.
    10. Shahid Yusuf, 1994. "China's Macroeconomic Performance and Management during Transition," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 71-92, Spring.
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    Cited by:
    1. Giovanni Dosi & Jiasu Lei & Xiaodan Yu, 2013. "Institutional Change and Productivity Growth in China's Manufacturing 1998-2007: the Microeconomics of Creative Restructuring," LEM Papers Series 2013/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Zheng, Jinghai & Bigsten, Arne & Hu, Angang, 2006. "Can China’s Growth be Sustained? A Productivity Perspective," Working Papers in Economics 236, University of Gothenburg, Department of Economics.
    3. LI, Hongyi & HUANG, Liang, 2009. "Health, education, and economic growth in China: Empirical findings and implications," China Economic Review, Elsevier, vol. 20(3), pages 374-387, September.
    4. Hongyi Li & Huang Liang, 2010. "Health, education, and economic growth in East Asia," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 3(2), pages 110-131, June.

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