July 21, 2005

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A study of China's dynamic growth

Ben Muse points to a study by the US Department of Agriculture titled China: A Study of Dynamic Growth:

Few countries have been able to match China’s sustained economic growth, which has averaged more than 8 percent annually since 1978. The combination of size and rapid growth make China’s economy a major driver in global economic change. China’s growth has been largely investment driven, with investment consuming roughly 40 percent of gross domestic product. Gains in factor productivity were realized after China abandoned strict central planning. China’s opening to foreign trade and investment has also been a key to growth. Conditions suggest that rapid growth will continue in coming years. However, the Chinese economy faces potentially
unsustainable pressures, including possible currency appreciation, rising rural-urban inequality, unemployment, banking reforms, and an unusual combination of inflationary and deflationary tendencies that could slow China’s growth.
It looks at why China has grown so fast, the role of foreign trade, foreign exchange policy, structural problems such as the banking system, SOEs and the growing income gap, amongst others. The study succinctly lays out why China's economy has been so successful and why there is a growing challenge for China's policy makers in keeping the pace of growth.

Given the country is getting used to so continuous rapid growth, these policy challenges are vital if the CCP plan to hold on to power in the years ahead. Their successful economic stewardship has helped their hold on power now that Communism is a proven failed ideology. They have no room for errors.

This study complemetns another I recently wrote about: China's uneven progress against poverty, which looks more closely at how China has been so successful in eradicating poverty and the further challenges in dealing with it.

The underlying conclusion from both studies is simple: what has worked until now will not sustain China's economic growth going forward. The question is how can China change its model to achieve sustainable growth?

posted by Simon on 07.21.05 at 10:59 AM in the


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Dear Simon,
The comrade Hu Jintao has received your reports, and his comments on your reports was “transfer to comrade Wen Jiabao”, Comrade Wen Jiabao suggested transfering them to economist comrade Wu Jinlian. Wu transferred his students and his students transferred to me. ME said : follow the party core, everything will be solved by great long living comrade Hu.

Comrade Hu is constructing his harmonic society.
So what?
This is a new left policy!
What the hell?
This will beef up the middle class.
10 years (or 20 years?) later, a new consumer driven economy will emerge, and 70% (or 60%?) of Chinese will live in cities.
This is why I always say: Don’t worry, follow our communist party; follow the core!

posted by: lin on 07.21.05 at 12:00 PM [permalink]

Nice to know these reports make their way up (and back down) the chain...


posted by: Simon on 07.21.05 at 12:25 PM [permalink]

Speaking of studies on China's economy, there's a book that I am currently reading which is very good as well, on the role of FDI in china during the reform era (80's) - "Selling China: Foreign Direct Investment during the reform era" by Yasheng Huang.

Although the book's main focus is only on FDI and the reform era, nevertheless it gives you an idea, and some understanding on how China becomes what it is now, I think it ties in well with this report.

posted by: The Dustless Workship on 07.21.05 at 05:36 PM [permalink]

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