Transition with Growth: The Chinese Experience in the World Economy

Abstract

This paper analyzes the Chinese experience of gradual transition with rapid growth (1978-1993) in the world economy. The rapid growth is decomposed into four sources: population/labor-led growth, privatization-led growth, industrialization-led growth and trade/leader-led growth. The growth of China's economy in the 1990s would be at least as fast as in the 1980s, provided there were no political/military turmoil. These results are based on the combination of historical, statistical and theoretical approaches, and on our theoretical analyses of the relationships among transition, industrialization, growth and development. We present stylized facts on transition and growth, and construct conceptual frameworks to match these facts. In particular, we show that a gradualism (big bang) transition may result in growth and inflation (depression and hyperinflation), and a follower with sufficient (insufficient) social capability would catch up to (fall behind) the leader.