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Growth, Competition and Political Stability in China

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Author Info

  • Fernando Alexandre

    ()
    (Universidade do Minho - NIPE)

  • Carmen Mendes

    ()
    (Universidade de Coimbra)

Abstract

A highly successful investment- and export-led growth strategy has positioned China as the second largest economy and as the largest exporter in the world. Households' consumption has played a minor role in its growth strategy, which is reflected in its unique and very high saving rates. In this paper we argue that the low weight of consumption in total expenditure is the result of the pervasiveness of the state in the economy, which aimed at impairing the growth of middle classes and,therefore, at preserving political stability. Nonetheless, an increase in purchasing power and the cultural individualisation of vast portions of the population is leading to an increase in popular mobilisation and social unrest. This indicates that, contrary to common pessimist analyses, prospects for democratization are perhaps stronger than usually presumed.

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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 28/2011.

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Date of creation: 2011
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Handle: RePEc:nip:nipewp:28/2011

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Keywords: China; growth; savings; financial markets; political stability;

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  1. Franco Modigliani & Shi Larry Cao, 2004. "The Chinese Saving Puzzle and the Life-Cycle Hypothesis," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 145-170, March.
  2. Chamon, Marcos & Prasad, Eswar, 2007. "Why Are Saving Rates of Urban Households in China Rising?," IZA Discussion Papers 3191, Institute for the Study of Labor (IZA).
  3. Qi, Li & Prime, Penelope B., 2009. "Market reforms and consumption puzzles in China," China Economic Review, Elsevier, vol. 20(3), pages 388-401, September.
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