China’s Remarkable Economic Growth

355 Pages·2012·1.67 MB·English

by  John Knight, Sai Ding

China’s Remarkable Economic Growth
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’
China s Remarkable
Economic Growth
John Knight and Sai Ding
1
3
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Preface
Thisbookiswrittenbyaneconomistneartheendofhiscareerandanother
nearthestartofhers.JohnKnightbeganhisresearchinthe1960s,whenmany
Africancolonieswereachievingindependence,andtherewasanewdetermi-
nationtoacceleratetheirpaceofeconomicdevelopment.Itwasnaturalforan
aspiringdevelopmenteconomisttobedrawnintoresearchonAfricanecono-
mies.By1990thehighhopesforAfricahadprovedunfounded,andhisinitial
optimismhadgivenwaytopessimism,partlybecauseitseemedthenthatthe
underlying problems were intractable, being as much political as economic.
China,bycontrast,wasjustopeninguptoforeignresearchers,itwasincreas-
inglypossibletoapplytheconventionaltoolsofeconomicanalysis,andthe
emergingeconomicreformsalreadysuggestedthatgrowthwouldberapidand
thatChinawouldbecomeamajoreconomywithinaveryfewdecades.Thus,
when the opportunity arose for him to conduct research on the Chinese
economy,heleapedatit.Fortwodecadeshismainresearchinteresthasbeen
theChineseeconomyanditstransitiontowardsbecomingamarketeconomy.
Over that period he has been engaged in answering several questions
concerningthelabourmarket,therural–urbandivide,rural–urbanmigration,
incomedistribution,education,subjectivewell-being,andpovertyinChina.
However,thebiggestquestions,subsumingallothers,concerntheremarkable
rateofeconomicgrowththatChinahasachievedoverthereformperiod:why,
how, and with what consequences? It is one of the most exciting and chal-
lengingissuesthatacontemporaryeconomistcanaddress.Hedecidedtotake
thisdauntingbullbythehorns.
WhenJohnKnightbegantoconductresearchonChina,theresearchresults
and understanding that were then available to western scholars were very
limited. Since then the literature on the Chinese economy has grown at an
exponentialrateevenfasterthanthatoftheChineseeconomyitself—reflecting
theincreasingavailabilityofgooddata,theexpandingnumberofwell-trained
Chineseeconomists,andthegrowingbandwagonofforeigneconomistswho
havebecomeinterested.Nevertheless,whetherourcriterionistheimportance
of the questions to be answered or the potential to help improve economic
welfare,theChineseeconomyremainsvastlyunder-researchedbycomparison
with more advanced economies. The explanation for this misallocation of
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Preface
resourcesisprobablytobefoundinthesociologyoftheeconomicsprofession
andtheresultantresearchincentives.
SaiDing,whoisnowalectureratGlasgowUniversity,joinedtheprojectasa
post-doctoral research officer at Oxford University, after initial training at
NankaiUniversityinTianjinanddoctoralresearchatBirminghamUniversity.
AlthoughshewasnewtoresearchontheChineseeconomy,overthecourse
of three years we have jointly produced three articles on cross-country and
cross-provincegrowthregressionsandanotheroninvestmentinChina.These
appear in suitably amended form as thefive chapters of Part II, representing
what is perhaps the core of the book (Chapters 4–8). We indicate in each of
PartsI–IVwhetherthatpartistheresultofjointorsingleauthorship.
Maynard Keynes once remarked that economists should write articles on
specifictopics,notbooks;advicewhichfortunatelyhedidnotalwaysobserve
himself. It is a great advantage of journal publication that one’s research
comesunderclosescrutinythroughthepeerreviewprocess,andcanbenefit
greatly from it. Our aim has been to publish the more original parts of the
bookinthiswayandthentorewritethematerialforthebookbothsothatit
can reach a broader readership and so that it can fit into the theme of the
book.Thehopeisthatthewholewilladduptomorethanthesumofitsparts.
ThisfollowsthesameformataswasusedinJohnKnight’stwopreviousbooks
on China, both with Lina Song: The Rural–Urban Divide: Economic Disparities
andInteractionsinChina(1999),andTowardsaLabourMarketinChina(2005).
Despiteourattempttodevelopatheme,wehavewrittenthebookinsucha
way that each chapter is fairly self-contained. The one exception is that the
methodological Chapter 5 is a necessary building block for the substantive
Chapters6and7.Ourapproachwouldenableareaderwithspecificinterests
to select particular chapters—although it would be useful to read the final,
concludingChapter13firstsoastoprovidecontext.
Many acknowledgements and thanks are due. The research on which the
bookisbasedwassupportedbyasubstantialgrantfromtheLeverhulmeTrust
(thefundedprojectbearsthesametitleasthebook)andtwograntsfromthe
NuffieldFoundationunderitsSmallGrantScheme.Wethankthesebodiesfor
their financial support and for the confidence that they have shown in the
research.
Wearegratefultothecopyrightholdersofthefollowingjournalsforpermit-
tingus,withacknowledgement,topresent,insuitablyrevisedform,workthat
hasappearedintheirjournals:SaiDingandJohnKnight,‘Cantheaugmented
Solowmodel explainChina’sremarkable economic growth?Across-country
paneldataanalysis’,JournalofComparativeEconomics,37(2009)(Chapter4);
SaiDingandJohnKnight,‘WhyhasChinagrownsofast?Theroleofphysical
and human capital formation’, Oxford Bulletin of Economics and Statistics, 73,
2(2011)(Chapters5and6);JohnKnightandSaiDing,‘WhydoesChinainvest
vi
Preface
somuch?’,AsianEconomicPapers,9,3(2010)(Chapter8);JohnKnight,Deng
Quheng and Li Shi, ‘The puzzle of migrant labour shortage and rural labour
surplusinChina’,ChinaEconomicReview,22,3(2011)(Chapter9);JohnKnight,
‘Reform, growth and inequality in China’, Asian Economic Policy Review, 3, 1
(2008) (Chapter 10); John Knight and Ramani Gunatilaka, ‘Does economic
growth raise happiness in China?’, Oxford Development Studies, 39, 1 (2011)
(Chapter11);andJohnKnightandWeiWang,‘China’smacroeconomicimbal-
ances:causesandconsequences’,TheWorldEconomy(2011)(Chapter12).
Chapter9isbasedonapaperpublishedjointlywithDengQuhengandLi
Shi.AversionofChapter11appearedasajournalarticlewrittenwithRamani
Gunatilaka.PartofChapter12isbasedonajointpublicationwithWeiWang.
JohnKnightthankshisco-authorsforallowingresultsoftheirjointresearch
tobeincludedinthisvolume.
Prototypes of various chapters have been presented at seminars in the
Universities of Essex, Fudan, Johannesburg, Kansai, Macau, Nottingham,
Oxford, Peking, Stellenbosch, and Western Ontario, and in Beijing Normal
UniversityandChineseUniversityofHongKong,andatconferencesorwork-
shopsinBeijing,Brighton,Durham,Frankfurt,Guildford,Helsinki,Notting-
ham,Oslo,Oxford,SanFrancisco,Shanghai,Stockholm,TokyoandWarwick.
Wearegratefultotheorganizersandparticipantsforprovidinguswiththese
opportunitiestoobtainhelpfulfeedbackontheresearchfromexperts.
Among the numerous colleagues and friends whom we wish to thank
forhelpful interestand adviceon the researchare MagnusBlomstrom, Deng
Quheng,DickEasterlin,MarkusEberhardt,BeltonFleisher,XiaolanFu,Ramani
Gunatilaka,HalHill,HuangYiping,AnkeHoeffler,GeetaKingdon,FungKwan,
LiShi,CyrilLin,GuyLiu,MengXin,RiaxinMinami,JimMirrlees,AlbertPark,
Qiao Tongfeng, Gus Ranis, Lina Song, Francis Teal, Jon Temple, John Toye,
WangWei,WangXiaolu,WingThyeWoo,AdrianWood,YaoYang,YuYongding,
LindaYueh,andZhangXiaobo.
We also thank the Department of Economics, University of Oxford, for
hosting the research, even after John Knight had retired from his post in
September2008;andtoDavidHendry,AnnGibson,ClaireBrunt,andGillian
Coatesforensuringthattheprojectransmoothly.
SaiDingisgratefulforthesupportoftheDepartmentofEconomicsinthe
UniversityofGlasgow.
The collegiality of the Fellowship of St Edmund Hall, Oxford has been, as
always,apowerfulsupport.JohnKnighthasbenefitedalsofromhismember-
shipoftheChinaGrowthCentreatStEdmundHall.
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Contents
ListofFigures xiii
ListofTables xv
PartI Introduction
JohnKnight
1.SettingtheStage 3
1.1TheIssues 3
1.2China’sEconomicHistory 4
1.3TheData 6
1.4TheMethodology 8
1.5OutlineoftheBook 9
2.ApproachestoUnderstandingEconomicGrowth 11
2.1ModelsofEconomicGrowth 11
2.2EmpiricalApproachestoEconomicGrowth 14
2.3EconomicGrowthandEconomicDevelopment 16
2.4EconomicGrowthandInequality 19
2.5LookingAhead 20
3.TheEvolutionofInstitutionsandPolicies 24
3.1Introduction 24
3.2CentralPlanning 25
3.3RuralReform 28
3.4UrbanReform 35
3.5Economy-WideReform 39
3.6ThePoliticalEconomyofEconomicReform 43
3.7Conclusion 50
PartII TheDeterminantsofChina’sEconomicGrowth
SaiDingandJohnKnight
4.ChinainaCross-CountryGrowthPerspective 57
4.1Introduction 57
4.2BackgroundtoChina’sGrowth 58
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