Determinants of economic growth in China: Private enterprise, education and openness

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Determinants of economic growth in China Private
enterprise, education and openness
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Purpose

• This essay investigates cross-provincial
  variations of economic growth in China in order
  to enclose the commodities among Chinas and the
  other countries growth patterns and also to
  investigate Chinas unique characteristics in
  growth pattern.

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Research Context and Frame Work

• Several works has been done towards the growth
  patterns in an economic utility. Many significant
  variables, such as education, inflation,
  fertility have been analyzed in order to
  understand their causal relationship with
  economic growth. In the case of China, the
  authors of this thesis paid attention to two
  important factors including the turning point of
  economic growth, the economic reform starting
  from 1978 and also the growing gap between
  coastal and inner area.

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• The author investigated six provinces in China,
  including Guangdong, Fujian, Jiangsu, Gansu,
  Shanxi and Yunan. Here, we have three coastal
  provinces, which are Guangdong, Fujian and
  Jiangsu. And the others are inner provinces.

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• Table One

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• Before the Economic Reform, the real national
  income per capita in the three coastal provinces
  is as similar as it in the inner provinces.
• After the Economic Reform, the real national
  income per capita in the three coastal provinces
  exceeded it in the inner provinces. We can see
  there is a gap of economic growth in different
  areas in China.

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• Table Two

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• Before the Economic Reform, the growth rate of
  real income per capita in coastal provinces was
  lower than it in inner provinces. However, after
  the Economic Reform, the growth rate in coastal
  provinces becomes much higher than it in inner
  provinces.

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• Table Three

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• Before the Economic Reform, there is no income
  gap exist between coastal and inner provinces,
  but after the reform, a deep gap between them
  occurred

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• Table Four

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• This table shows that, firstly, the development
  of private and collective enterprises contributes
  to high growth rate. Secondly, the high
  percentage of engagement in foreign trade leads
  to high growth rate. Thirdly, the quality and
  quantity of human capital also contribute to high
  growth rate.
• These three factors account for the increasing
  growth gap between coastal and inner provinces in
  China.

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Research Design and Data

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  ß5INFLATEi ß6TRADEi ei

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Empirical results
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• Initial level of development has a negative and
  significant effect on economic growth rate.
• Human capital accumulation has a positive and
  significant effect on economic growth rate.
• High fertility has a negative and significant
  effect on economic growth rate.

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• High level of inflation has a negative and
  significant effect on growth rate.
• Highly involvement in international trade has a
  positive and significant effect on growth rate.
• The presence of state-owned enterprises has a
  negative and significant effect on growth rate.

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• Industrialization in 1980s has a positive and
  significant effect on economic growth in this
  period.
• Investment shares has a positive but not
  significant effect on economic growth.

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Conclusion

• The author of this article gave out some
  suggestions to the government
• Firstly, the government should pay attention
  to the problems of SOEs. Also, the government
  should support the development of private and
  collective enterprises.

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• Secondly, inner provinces should engaged more
  in foreign trade and also the restrictions to
  trade between provinces should be removed.
• Thirdly, the government should not only
  emphasize on the importance of education in inner
  provinces, it should also contribute to the
  building up of a labor system that could be used
  to reward education.

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• Fourthly, the government should emphasize on
  the development of inner areas of China.
• Lastly but not least, the using of government
  fund should maximum the efficiency.

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Chinas Economic Growth 1978-2025 What We Know
Today About Chinas Economic Growth Tomorrow
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Abstract

• This paper examines Chinas future growth
  prospects and the potential drivers of future
  growth using two approaches.
• And the conclusion is that, Chinas economic
  growth is likely to continue at current rates
  through 2015 before it gradually slows down.

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The First Approach

• In this approach, the author predicted the future
  development of China based on the assumption, we
  can see the future from the past.

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• Step One exam how Chinas development match the
  standard growth patterns
• In this step, the author did a comparative
  study by comparing Chinas growth and Korea,
  Japan and Taiwans growth patterns.

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• Growth patterns structural change, catching up
  and price equalization.
• Structural change By looking at the growth of
  labor productivity in China, the author summarize
  that, China is still at the beginning stage of
  structure change, as a result, China will
  continue to growth in the future 35 years.

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• Catching up China still has a long way to go
  to catch up with the USs level of labour
  productivity. Becourse of the large potential for
  catching, the development of Chinese economy will
  continue in the future.
• Factor price equalization Chinas potential
  for economic growth from relatively low labor
  costs will continue to exist for another 30
  years.

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The Second Approach

• In this approach, the authors decomposed GDP into
  its income components and tried to use the
  predicted quantity and quality of labor in the
  future to predict the economic growth in China.
• GDP labor remuneration depreciation net
  taxes on production operating surplus

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• Assumptions
• the past relations between wage and labor
  variables continues to hold in the future
• the annual change in the net tax rate on
  production continues to be relatively small
• the products of the depreciation share and
  depreciation growth rate continue to be
  relatively small
• the products of the surplus share and surplus
  growth rate continue to be relatively small

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• Conclusion of the second approach
• The author use the date from 1990 to 2000 to
  predict the economic growth during 2000 to 2005.
  The result is closer to the reality. That
  provides the credibility of this approach. Than,
  the author using the data to predict the future
  development in China. He found that, the long-run
  trends in the income growth because of the
  increasing human capital in China would
  contributes to the future development in China.

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Conclusion

• Using the two approaches to predict Chinas
  economic development in the future, we can see
  that, Chinese economy will continue to growth in
  the future 30 years. The growth of China implies
  that the center of the world economic activity
  shifts to Asia area. Of course, the economic
  prediction is not certainty. At least, it could
  just predict the long-run development but has
  nothing to do with the short-term development. We
  could not omit the problems may occur in Chinas
  growth path, such as environmental pollution, bad
  loans in the banking system, lack of a rural
  health care system and so on. However, what we
  have to pay attention to is that, the Chinese
  government has already made effort to face these
  challenges.