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The Impending Long March of the Chinese Economy

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  • Harashima, Taiji

Abstract

The Chinese economy is currently faced with the difficult problems of slowing economic growth and huge overcapacity. China is struggling to adapt to a “new normal.” Here, I examine the mechanism of why China is faced with these problems and some potential future paths of the Chinese economy. China does not have a socialist, socialist market, or market-oriented economy. Rather, it has a “state-driven economy” and that has deviated far from the saddle path to the steady state. The model of a state-driven economy constructed in this paper indicates that it is highly likely that China will proceed along a long-running transition path with low or no growth, but it is also very likely that China will excessively build up its military.

Suggested Citation

  • Harashima, Taiji, 2016. "The Impending Long March of the Chinese Economy," MPRA Paper 73275, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:73275
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    File URL: https://mpra.ub.uni-muenchen.de/73275/1/MPRA_paper_73275.pdf
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    References listed on IDEAS

    as
    1. David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital; Firm Ownership and Investment Efficiency in China," IMF Working Papers 07/9, International Monetary Fund.
    2. M. Albert & C. Jude & C. Rebillard, 2015. "The Long Landing Scenario: Rebalancing from Overinvestment and Excessive Credit Growth. Implications for Potential Growth in China," Working papers 572, Banque de France.
    3. Oskar Lange, 1937. "On the Economic Theory of Socialism: Part Two," Review of Economic Studies, Oxford University Press, vol. 4(2), pages 123-142.
    4. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 729-758.
    5. John Knight & Sai Ding, 2010. "Why Does China Invest So Much?," Asian Economic Papers, MIT Press, vol. 9(3), pages 87-117, Fall.
    6. Harashima, Taiji, 2011. "A Model of Total Factor Productivity Built on Hayek’s View of Knowledge: What Really Went Wrong with Socialist Planned Economies?," MPRA Paper 29107, University Library of Munich, Germany.
    7. Taiji Harashima, 2004. "A More Realistic Endogenous Time Preference Model and the Slump in Japan," Macroeconomics 0402015, University Library of Munich, Germany, revised 09 Feb 2004.
    8. Harashima, Taiji, 2016. "The Cause of the Great Recession: What Caused the Downward Shift of the GDP Trend in the United States?," MPRA Paper 69215, University Library of Munich, Germany.
    9. Harashima, Taiji, 2013. "Escaping a Liquidity Trap: Keynes’ Prescription Is Right But His Reasoning Is Wrong," MPRA Paper 48115, University Library of Munich, Germany.
    10. Ettore Dorrucci & Gabor Pula & Daniel Santabárbara, 2013. "China’s economic growth and rebalancing," Occasional Papers 1301, Banco de España;Occasional Papers Homepage.
    11. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    12. Harashima, Taiji, 2009. "Depression as a Nash Equilibrium Consisting of Strategies of Choosing a Pareto Inefficient Transition Path," MPRA Paper 18953, University Library of Munich, Germany.
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    More about this item

    Keywords

    The Chinese economy; Transition; Economic growth; Overcapacity; Pareto inefficiency;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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