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The rise of China as an economic power

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  • Goodhart, C. A. E.
  • Xu, Chenggang

Abstract

In the twenty years since the Cultural Revolution, China has maintained fast real growth. This occurred despite China having similar problems to other transitional economies, eg loss-making State Owned Enterprises (SOEs), eroding fiscal revenues and inflation, (Section 3). Although China initially adopted the Soviet central planning model, after the 1950s break Chinese planning changed towards a regionally-based system with local planning (Section 2). In contrast to the centrally-based, functionally-specialized (U form or unitary structure) Soviet model, the Chinese-economy is organized on a multi-layer-multi-regional (M form) basis. This encouraged development of small size township and village enterprises (TVEs), the main engine of Chinese growth. Power and control remained with the Party and the State, but was diffused much more widely, regionally and locally. This allowed initiatives at lower (political) levels to establish institutions, both in agriculture (the 'household responsibility system') and industry (TVEs), without state protection. Even among regionally controlled SOEs, 'tournament rivalry' between regions, etc, and between SOEs and TVEs provided competition.

Suggested Citation

  • Goodhart, C. A. E. & Xu, Chenggang, 1996. "The rise of China as an economic power," LSE Research Online Documents on Economics 3753, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:3753
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    File URL: http://eprints.lse.ac.uk/3753/
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    References listed on IDEAS

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    4. Zheng, Jinghai & Liu, Xiaoxuan & Bigsten, Arne, 1998. "Ownership Structure and Determinants of Technical Efficiency: An Application of Data Envelopment Analysis to Chinese Enterprises (1986-1990)," Journal of Comparative Economics, Elsevier, vol. 26(3), pages 465-484, September.
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    6. Carolyn P. Egri & David A. Ralston, 2004. "Generation Cohorts and Personal Values: A Comparison of China and the United States," Organization Science, INFORMS, vol. 15(2), pages 210-220, April.
    7. Zheng, Jinghai & Bigsten, Arne & Hu, Angang, 2009. "Can China's Growth be Sustained? A Productivity Perspective," World Development, Elsevier, vol. 37(4), pages 874-888, April.
    8. Giovanni Dosi & Jiasu Lei & Xiaodan Yu, 2013. "Institutional Change and Productivity Growth in China's Manufacturing 1998-2007: the Microeconomics of Creative Restructuring," LEM Papers Series 2013/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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    11. Wei, Zuobao & Varela, Oscar & Kabir Hassan, M., 2002. "Ownership and performance in Chinese manufacturing industry1," Journal of Multinational Financial Management, Elsevier, vol. 12(1), pages 61-78, February.

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    JEL classification:

    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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