China’s Growth Performance Since 1952

Professor Xiaodong Zhu

January 26, 2022

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Brazil
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China
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India
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Indonesia
Per Capita GDP in 2011 US Dollar

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USA 1991
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China’s growth in modern period

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 China’s growth between 1953-1978

• China was one of the poorest economies in the world in 1953

• China started its industrialization push with the first five-year

plan (1953-1957), which was quite successful

• The next big industrialization push–Great Leap

Forward–started in 1958, however, resulted in economic and
humanitarian disasters between 1958 and 1961

• The economic recovery after 1961 was then followed by ten

years of the Cultural Revolution (1966-1976), a movement
that focused on political class strugles rather than economic
development
 China’s industrialization strategy before 1978
• Mobilized all the resources to invest in capital intensive heavy
industries such as heavy equipments and machinaris , chemical
plants, infrastructure projects, etc
• Price of agricultural goods were set deliberately low and the
price of industrial goods were set deliberately high, so that all
the profits go to the industrial enterprises
• The industrial enterprises were mostly owned by the state and
their profits were remitted to the central government, which
then used the resources to invest in heavy industries
• The economic strategy was highly unbalanced, promoting
heavy industries at the expenses of agriculture, light consumer
industries, and services
• There were constant shortages of food, consumer products,
and services
 China in 1978

• Despite government-led efforts of industrialization and

investmnts in heavy industries between 1953 and 1977, China
was still one of the poorest economies in the world in 1978

• It was still an agrarian economy with 70% of the labor force

working in agriculture

• Until 1978, China still had not escaped the Malthusian trap:
There were chronical food shortages, even with a majority of
people working in agriculture
 China since 1978

• Since 1978, however, China has successfuly become a truly

industrialized country
Manufacturing Gross Value Added in the US, China and
Japan
 China since 1978

• Since 1978, however, China has successfuly become a truly

industrialized country

• It is now one the the largest economy in the world

US and Chinese GDP (PPP basis) as a share of global GDP
 China since 1978

• Since 1978, however, China has successfuly become a truly

industrialized country

• It is now one the the largest economy in the world

• It is also the most important player in international trade

China’s share of global merchandise exports
 China since 1978

• Since 1978, however, China has successfuly become a truly

industrialized country

• It is now one the the largest economy in the world

• It is also the most important player in international trade

• What are the sources of China’s great economic

transformation since 1978?
Sources of China’s Growth since 1978
 What drives China’s growth since 1978?

There are three widely held views about China’s growth

• Data problem: growth rates have been consistently over stated

• State capitalism: growth has been driven by high rates of

investement, especially state sector investment

• International trade and surplus labor: growth has been driven

by export expansion fueled by aboudant cheap labor

Are they really the drivers of China’s growth?