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Innovation and Economic Growth in China

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Innovation and Economic Growth in China
ECONOMICS

INNOVATION AND ECONOMIC GROWTH IN CHINA

by

Yanrui Wu Business School The University of Western Australia

DISCUSSION PAPER 10.10

Innovation and Economic Growth in China

Yanrui Wu ( ) Economics UWA Business School University of Western Australia Australia yanrui.wu@uwa.edu.au

Abstract China has enjoyed high economic growth for three decades since the initiative of economic reform in 1978. This growth has however been driven mainly by labour-intensive, export-oriented manufacturing activities. Has innovation played a role in China’s economic growth? What are the determinants of innovation in the Chinese economy? These are some of the questions which are to be explored in this study. Answers to these questions have important policy implications for China’s economic development in the future as innovation is vital for the transformation of the country’s growth model.

Key words Innovation, economic growth, Chinese economy JEL codes O33, O53

延延吴

Innovation and Economic Growth in China

1. Introduction

Since the initiative of economic reform in 1978, China has enjoyed high economic growth for three decades. This growth has however been driven mainly by exportoriented, labour-intensive manufacturing activities. In 2008 the total value of China’s export accounted for 32% of the country’s GDP.1 In the mean time, tens of millions of workers were employed in the export sector. As a result the Chinese economy is very vulnerable to external shocks such as the 2008 US sub-prime credit crisis and the resultant recession and decline in demand for Chinese exports. To sustain economic growth in the future, China’s policy makers are keen to boost the role of innovation in the country’s economic development so that the economy will eventually be transformed into a knowledge-intensive one which is less dependent upon external markets (Schaaper 2009, Zhang et al. 2009). This goal is clearly envisaged in the country’s “Medium-to-Long Term Plan


References: Calculated using information from the 2008 Statistical Communiqué of National Economy and Social Development, National Bureau of Statistics of China (released on February 26, 2009, www.stats.gov.cn).
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