China's spectacular economic rise is challenging both the international order and the discipline of economics. Four questions, in particular, span the concerns of various communities of China-watchers: Why has China's economy grown as it has? How exceptional is the Chinese case? Is the growth sustainable? And what kind of capitalism is China developing? The readings below provide a good overview of these debates.
This is the best single-volume primer on the modern Chinese economy, with chapters on every aspect of China's development -- from geography, the pre-1949 economy, and urban and rural development to industry, innovation, finance, trade, and investment. Barry Naughton recounts how between 1979 and the mid-1990s China "grew out of the plan" by gradually introducing market incentives, an approach distinct from the "big bang" price-and-property-rights-reforms associated with Eastern European transitions. Through both the text and annotated references at the end of each chapter, he gives a balanced introduction to the major academic and policy debates on China's economy.
Justin Yifu Lin is a leading Chinese economist and currently the chief economist of the World Bank. He argues that China's pattern of growth is attributable to its particular political institutions as well as the ideas that influenced Chinese leaders. In Lin's account, ideas and political possibilities dominate choices, but the experiences of China and other Asian economies offer general lessons for development economics. Technological innovation is the most important driving force for growth in any economy. Market incentives are also critical for success, encouraging efficiency and helping to maximize welfare. By drawing together observations about what is -- and what is not -- unique about China's economy, Lin moves beyond recent discussions over whether the country's experience can be distilled into a "Beijing Consensus." His ideas help identify not only the sources of China's successes but also its challenges going forward.
"The Great Leap Backward?" By Elizabeth C. Economy. Foreign Affairs (September/October 2007): pp 38-59.
Environmental, economic, and sociopolitical concerns raise questions about the sustainability of China's recent growth trends. Elizabeth Economy's article brings into sharp focus both the causes and consequences of China's environmental crisis, an issue she took up in her 2005 book, The River Runs Black. By highlighting policy choices and social ramifications, Economy provides a useful complement to other work on China's energy-environment crisis, such as that by Vaclav Smil, which focuses on the material constraints on China's options. Sustaining economic growth requires a more balanced development model, since China's economy currently exhibits excessive reliance on investment (versus consumption), excess industrial capacity (particularly in heavy industry), persistent weaknesses in technological innovation and intellectual-property protection, and a financial system dominated by state banks lending primarily to state industry. Sociopolitical problems -- including rising levels of inequality, along with corruption and repression -- are the dark underside of China's growth story. China will need to institute additional social and political reforms if it is to avoid further conflicts that could undermine development.
Many of the all-stars of China studies are represented in the Loren Brandt and Thomas Rawski volume. Two chapters in particular are worth special mention. In "Forecasting China's Economic Growth to 2025," Dwight Perkins and Thomas Rawski examine "which economic choices matter" if China is to double GDP per capita from today's level of about $7,000 (adjusted for purchasing power parity [PPP]). They also offer an introduction to the intense debate over productivity growth in China. Nicholas Lardy and Lee Branstetter's essay, "China's Embrace of Globalization," meanwhile, describes the role of foreign trade and investment in China's growth, as well as China's growing impact on global markets. Their analysis reveals China's limitations as an international trade and financial player, indicating that it is premature to speak of China and the United States forming a G-2. Though Beijing now wants more say within international economic institutions, China's growing stake in the liberal global trade and financial system is a stunning reversal of its pre-1979 isolation and ideological opposition to markets and competition. The analyses of China's economy in this volume prompt questions that may help advance economic methods more generally, such as: Is it possible to improve on GDP per capita as a proxy for individual wealth? Beyond comparing relative living standards, is it appropriate to use PPP-adjusted figures to compare relative international economic capability in trade, finance, or defense spending? How should twenty-first-century trade balances be measured -- by final shipments of products or by the value added at each step in global production?
Studies in the Economic History of Late Imperial China: Handicraft, Modern Industry, and the State. By Albert Feuerwerker. University of Michigan Press, 1996.
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Capitalism With Chinese Characteristics: Entrepreneurship and the State. By Yasheng Huang. Cambridge University Press, 2008.
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