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Why has China Grown so Fast? The Role of Structural Change

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  • Ding, Sai
  • Knight, John

Abstract

Can others learn from China's remarkable growth rate? We explore some indirect determinants of China’s growth success including the degree of openness, institutional change and sectoral change, based on a cross-province dataset. Our methodology is the informal growth regression, which permits the introduction of some explanatory variables that represent the underlying as well as the proximate causes of growth. We first address the problem of model uncertainty by adopting two approaches to model selection, Bayesian Model Averaging and the automated General-to-Specific approach, to consider a wide range of candidate predictors of growth. Then variables flagged as being important by these procedures are used in formulating our models, in which the contribution of factors behind the proximate determinants are examined using panel data system GMM. All three forms of structural change - relative expansion of the trade sector, of the private sector, and of the non-agricultural sector - are found to raise the growth rate. Moreover, structural change in all three dimensions was rapid over the study period. Each change primarily represents an improvement in the efficiency of the economy, moving it towards its production frontier. We conclude that such improvements in productive efficiency have been an important part of the explanation for China's fast growth. --

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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 with number 7.

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Date of creation: 2009
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Handle: RePEc:zbw:gdec09:7

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Keywords: Economic growth; Structural change; Openness; Institutional change; China;

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Cited by:
  1. Sai Ding & Alessandra Guariglia & John Knight, 2010. "Does China overinvest? Evidence from a panel of Chinese firms," Working Papers, Business School - Economics, University of Glasgow 2010_32, Business School - Economics, University of Glasgow.
  2. Sai Ding & John Knight, 2011. "Why has China Grown So Fast? The Role of Physical and Human Capital Formation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(2), pages 141-174, 04.
  3. Selin Özyurt & Jean-Pascal Guironnet, 2011. "Productivity, scale effect and technological catch-up in Chinese regions," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 4(2), pages 64-80, June.
  4. repec:hal:wpaper:halshs-00667467 is not listed on IDEAS
  5. Knight, John & Wang, Wei, 2011. "China’s Macroeconomic Imbalances: Causes and Consequences," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 15/2011, Bank of Finland, Institute for Economies in Transition.
  6. John Knight & Sai Ding, 2010. "Why Does China Invest So Much?," Asian Economic Papers, MIT Press, MIT Press, vol. 9(3), pages 87-117, October.
  7. Jinzhao Chen, 2012. "Real Exchange Rate and Economic Growth: Evidence from Chinese Provincial Data (1992 - 2008)," PSE Working Papers halshs-00667467, HAL.

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