Entrepreneurship and Discovery of China Miracle

Since the reform and opening up, the Chinese economy has maintained a high growth rate for more than 40 years, resulting in the “China Miracle” that has attracted worldwide attention. Following Schumpeter's theory of economic development, we will explore the “discovery” mechanism of the Chinese miracle from the perspective of innovation and entrepreneurship. According to the theory of comparative advantage, once China is integrated into the international division of labor from a closed economy, it should specialize in labor-intensive industries and fully exploit its corresponding comparative advantage. However, in practice, this “comparative advantage” needs to be discovered by micro-entities through a continuous process of trial and error. However, as Dani Rodrik points out, the free market does not provide sufficient incentives for this because rapid imitation by competitors can lead to innovators not being able to recover their trial-and-error costs. Since reform and opening up, China has gradually developed a “socialist market economic system” with Chinese characteristics. This is a highly centralized political and decentralized economic “Sphinx” system that, strange as it may seem, provides a strong incentive to discover and exploit China's comparative advantage in the international division of labor system. In short, two types of entrepreneurs emerged from this system, namely, “economic entrepreneurs” and “political entrepreneurs”. “Economic entrepreneurs” correspond to what is commonly called entrepreneurs, whose goal is to maximize their profits and whose constraint is that, in principle, they can only use their private resources.