China’s Rapid Economic Growth and Institutional Economic Reform, and Future Growth| Can institutional reform (the transition from central planning to a market economy) provide a sufficient explanation for China’s rapid economic development over the past three decades? What needs to happen in order for growth and development to be maintained in future?| |
The country; one of the oldest civilizations in the world has created the history since the civilization has constructed. Since then, the country called “The people’s Republic of China” has grown and especially last three decades, the growth of China is outstanding.
In current time, the population of China (2010) reached more than 1.34 billion (National Bureau of Statistics of China, 2011). In addition, China’s economic growth in last three decades is remarkably fast. The GDP growth rate in China from 1978 to 2005 is estimated at more than 9% a year (Hu & Khan, 1997, Pg.1) while growth rate in US during same period is counted at nearly 3% (U.S. Census Bureau).
In the past three decades, this period includes many economic transitions, and new policies and regulations were applied. These facts would leads to the rapid growth in China. This paper will mention how the Chinese economical and institutional reform affects to the country’s development and consider the way to maintain and reinforce economic growth and development in future.
Determinant of Development
Basically, the Development is defined as the gradual growth of something that is become more advanced, stronger, and efficiently. (Oxford Advanced Learner’s Dictionary, 2005). Traditionally, it also means national economic capacity, which basic economic condition is relatively static for long time (Tadoro, 2011, Pg. 14).
Under the view of traditional economic measures, development has meant the national economical capacity which the economic condition is static for long time to create and maintain an annual increase of gross national profit (GNP) and gross domestic product (GDP). Since 1978 when Deng Xiaoping, who was a politician and reformist leader of Communist Party of China and who attempted to change the china’s economy toward a market economy, started Chinese economic reform, China’s annual growth rate has kept higher position and the average of annual growth rate is more than 9% a year while the annual growth rate before 1978 was 6% a year (Hu. 1997. Pg. 1). Also, traditional economic measures consider the social indicators such as: literacy rate, health condition, housing, saving, schooling and so on. Literacy rate in china has dramatically increased from 65.5% in 1982 to 94.3% in 2010 (UNESCO). The expenditures on health also have grown to 4.6% of GDP (WHO). Moreover, the higher education rate (senior secondary graduates entering into institution or higher learning) increased as well from 27.3% in 1990 to 82.5% in 2004 (China Statistics. 2005). As can be seen from these facts, China can be said that this country has grown rapidly. However, what fact would influence to the China’s rapid economic growth, and how institutional reform influenced rapid growth in China?
Frankly speaking, institutional reform since 1978 in China contributed the China’s rapid economic growth and can be a sufficient explanation of growth.
Chen et al (1999, Pg. 13) mentioned that high growth in the coastal providence in China since 1978 would have been happened by the growing non-state-owned enterprises which is privately owned firm, and it is because of institutional reform. Also, it is said that market-oriented-reform since economic reform in China from 1978 could be crucial of productivity boom, which directly influences to the economic growth (Hu & Khan, 1997, Pg. 4). Between 1998 and 2010, the number of state-owned enterprises has declined from 64,700 to 20,300 on the other hand, the private...