An ananlysis of the economic growth in China

Abstract

As stated in our research question, the aim of this Contemporary Concerns Study was examine the main drivers of Chinas rapid economic growth from 1978 onwards, and to analyse some of the most important implications of the Chinese WTO accession. The 1978-reforms are seen as vital in the facilitation of economic growth, where the WTO accession is argued to be a continued and deepening integration of the market-oriented reforms, aimed at further strengthening the impact of the key economic drivers. Our main findings are that (1) capital accumulation contributed greatly due to a high level of investments, (2) improved labour participation rate, by achieving a transition from high to low fertility and mortality, fostered economic growth, (3) that TFP-growth played a major role in the contribution to economic growth especially through increased FDI and (4) that the Chinese WTO accession had both positive and negative aspects for China and their Western trading partners. The implication of the latter finding is displayed through a negative impact on employment in the Western countries, positive impact on employment in China, increased effort on achieving international labour standards in China (though they still lag behind their Western trading partners) and that the historical trend of increasing income inequality in China has stabilized and even slightly decreased from 2003 onwards (however, being stabilized at a relatively high level). In addition, we predict that the substantial contribution to economic growth from cheap labour during the reform period will decrease as well as an increase in rotten loans in the coming years. In order to achieve continued economic growth in the future, we argue that China has to (1) improve their educational system, (2) allocate more resources to R&D and (3) implement new financial policies and incentives for the private SMEs in order to facilitate innovation, as their period of technological imitation-led growth is over.