Development Of China Essay

Essays on economic *growth in China

Xiang Ao, University of Nebraska - Lincoln

Abstract

China's real GDP grew at about 9% per year during the last two decades. The last two decades have seen great economic achievements in China. However, as the society advanced, many economic issues emerged and have remained unresolved. This thesis addresses three important issues. ^ Similar to the case of the “Four Asian Tigers”, a hotly debated question is raised in the literature: Is this extraordinary growth rate of China due only to factor accumulation or to a large degree due to improvement in technology and efficiency? In Chapter 2, I estimate TFP growth rates of Chinese provinces using two different models. The average TFP growth rate estimated by the fixed-effect model is 4.9%. However, this approach assumes full efficiency, i.e., the TFP growth rates we estimate includes both technical changes and technical efficiency changes. The average technical change rate estimated by a stochastic frontier model is estimated to be about 2.7%, higher than Young (2000)'s estimate of TFP growth rate. It shows that China has benefited significantly from technological improvement. ^ Chapter 3 addresses the question of convergence: Does conditional convergence exist among Chinese provinces? A neoclassical growth model is adopted and tested. Then an equation is formulated for testing convergence as a dynamic panel data model, and fixed-effect estimators are used to estimate it. Convergence is detected and the convergence rate is calculated. ^ Chapter 4 studies the relationship between regional inequality and economic growth in the case of China. In this study, I use a dataset consisting of the standard deviations of per capita income, per capita GDP growth rate, and the labor force of all the 30 provinces (metropolitan areas) from 1952 to 1998, to estimate the effect of regional disparity on economic growth of Chinese provinces during the reform period. A positive relationship is detected between regional inequality and economic growth of China. However, the positive relationship is not significant during the reform period. ^

Subject Area

Economics, General

Recommended Citation

Ao, Xiang, "Essays on economic *growth in China" (2002). ETD collection for University of Nebraska - Lincoln. AAI3064554.
https://digitalcommons.unl.edu/dissertations/AAI3064554

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China's Development Essay

China's development is praised by the whole world. Its developments are not only in the economic aspect, but as well in its foreign affairs. Compared with other developed countries, China is a relatively young country. It began constructing itself in 1949. After 30 years of growth, company ownership had experienced unprecedented changes. Entirely, non-state-owned companies can now be more involved in sectors that used to be monopolized by state-owned companies.
Its phenomenal success is because it developed some suitable public policies, which were the perfect fit for the situation in China. In the last few years, China has had a remarkable economic development and has come to play an increasingly significant role in our world economy.
When the new Chinese Government was set up in 1949, the new government faced a lot of problems. First on their agenda was how to re-build the country. As Communist Party of China (CPC) is a socialist party, their policies at the time were similar to that of the Soviet Union’s. Consequently, the CPC used a centrally planned strategy as its economic strategy when it first began. For a long time, the Chinese economy was a centrally planned economy in which none other than the state owned all companies. In fact, there were absolutely no entrepreneurs. As time went on, the problems of a centrally planned economy started to appear, such as low productivity, which was the key reason for restricting the development of China. With the population growing, the limitations of the centrally planned economy were clear. In 1978 China started its economic reform whose goal was to generate sufficient surplus value to finance the modernization of the Chinese economy. In the beginning, in the late 1970s and early 1980s, trade was opened to the outside world and the Contract Responsibilities System (CRS) was implemented in agriculture. The CRS gave farmers the right to make independent decisions on using a small piece of contracted land. This new system resulted in eight hundred million farmers gaining the decision-making power on farmland management. The household Contract Responsibilities System helped China’s agriculture step out of the long-term predicament it was in. The agricultural business grew fast toward specialization, commercialization, and socialization. Another positive outcome that resulted from the CRS was the Township-Village Enterprises that thrived from the Chinese farmers. These Township-Village Enterprises set up factories in the countryside, so the peasants could work at the factories as well as work on the land. In China at that time, most of the people were peasants, so this policy generated a lot of them to get employed. Even today, more people live in the countryside compared to those people who live in the city. All in all, the Township-Village Enterprises contributed a lot to the development of China during the reform.
By the end of the 1980s China had almost solved its food shortage problems. Around...

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