Making sense of china's economic transformation

Abstract

China’s sustained rapid economic growth over the post-1978 reform era, which is also the era of globalisation, is of worldwide importance. This growth experience has been\rbased mainly on China’s internal dynamics. In the first half of the era, economic growth was propelled by improvement in both allocative efficiency and productive efficiency. From the early 1990s until the present time, however, economic growth has been increasingly based on\rdynamic increasing returns associated with a growth path that is characterised by capital deepening. In both periods, the growth paths and their associated long-term-oriented institutions contradict principles of the free market economy – i.e., doctrines of globalisation. In the form of an analytical overview, this article seeks to explain and interpret the historical background, logic of evolution, and developmental and social implications of China’s economic transformation. The analytics draws on a range of relevant economic theories including Marxian theory of economic growth, Post-Keynesian theory of demand\rdetermination, and Neo-Schumpeterian theory of innovation. It is posited that these alternative theoretical perspectives offer better insights than mainstream neoclassical economics in explaining and interpreting China’s economic transformation.