China's Economy E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Surveys of Recent Research in Economics
• Sprache: Englisch

Seitenzahl: 499

Veröffentlichungsjahr: 2014

Beschreibung

This collection of critical surveys provides readers with a range of up-to-date work from leading scholars in the area, writing on some of the key issues facing China, as they survey the present and future challenges of the Chinese economy

• Nine papers provide detailed discussion on key aspects of the past, present and future of the Chinese economy
• Leaders in their relevant fields of scholarship tackle some of the critical issues facing China
• Contributors identify common themes, including the household registration system, urbanization, demographic transition, inequality and the sustainability of economic growth
• Articles provide a critical review of the literature and discuss policy implications and areas for future research

Leseprobe

China's Economy

A Collection of Surveys

Edited by Iris Claus and Les Oxley

This edition first published 2015 Chapters © 2015 The Authors Book compilation © 2015 John Wiley & Sons, Ltd Originally published as a special issue of the Journal of Economic Surveys (Volume 28, Issue 4)

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CONTENTS

Chapter 1: The Chinese Economy, Past, Present and Future

Note

References

Chapter 2: A Survey of Recent Research in Chinese Economic History

1. General Introduction: The Field of Economic History of China

2. New Development During the Last Two Decades

3. Directions of Future Research

Notes

References

Chapter 3: Demographic Transition and Labour Market Changes: Implications for Economic Development in China

1. Introduction

2. The Demographic Transition in China

3. The Effects on China's Labour Market

4. The Implications of Demographic Transition for Economic Development

5. Policy Implications and Future Research

Notes

References

Chapter 4: Pension Reform in China: Challenges and Opportunities

1. Introduction

2. Demography

3. China's Pension System Reform: Challenges and Issues

4. Recent Initiatives

5. Future Research Directions

Acknowledgements

Notes

References

Chapter 5: The Evolution of the Housing Market and Its Socioeconomic Impacts in the Post-Reform People's Republic of China: A Survey of the Literature

1. Introduction

2. Development of the Housing Market

3. The Functioning of the Housing Market in the Postreform People's Republic of China

4. Summary and Future Research Directions

Acknowledgments

Notes

References

Chapter 6: Urbanization and Urban Systems in the People's Republic of China: Research Findings and Policy Recommendations

1. Introduction

2. The PRC's Urbanization and Urban System: Segregation, Repression and Distortion

3. Impacts of Repressed and Distorted Urbanization

4. Policy Suggestions

Acknowledgments

Notes

References

Chapter 7: Income Inequality in the People's Republic of China: Trends, Determinants, and Proposed Remedies

1. Introduction

2. Inequality Profiles

3. Sources or Causes of the Rising Inequalities

4. Suggested Interventions

5. Summary and Areas for Future Research

Acknowledgment

Notes

References

Chapter 8: The Evolving Geography of China's Industrial Production: Implications for Pollution Dynamics and Urban Quality of Life

1. Introduction

2. The Changing Geography of China's Industrial Production

3. Implications for Spatial Variation of Pollution and Local QOL

4. Conclusion

Acknowledgements

Notes

References

Chapter 9: Innovation in China

1. Introduction

2. Measuring Innovation in China

3. Developing Innovation Capability: The Chinese way

4. Regional Inequality in Innovation and Regional Innovation System

5. Conclusion

Acknowledgment

Notes

References

Chapter 10: China's Service Trade

1. Introduction

2. The Performance of China's Service Trade

3. Services Development in China's Wider Development Strategy

4. Evaluating the Impacts of China's Service Trade Liberalization and Development

5. Potential Global Implications of China's Service Trade Development

6. Conclusion

Notes

References

Index

End User License Agreement

List of Tables

Chapter 3

Table 1.

Table 2.

Table 3.

Table 4.

Chapter 7

Table 1.

Chapter 8

Table 1.

Table 2.

Table 3.

Chapter 9

Table 1.

Table 2.

Chapter 10

Table 1.

Table 2.

Table 3.

Table 4.

Table 5.

Table 6.

Guide

Cover

Table of Contents

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1THE CHINESE ECONOMY, PAST, PRESENT AND FUTURE

Iris Claus and Les Oxley

University of Waikato

Since initiating reforms in 1978 China has experienced an unprecedented rate of economic growth and development to become the second largest economy in the world after the United States. Yet there is so much that we do not know about the internal workings and operations of the Chinese economy, in part, because the available English-language literature is but a fraction of the scholarly work on China. English-speaking scholars, business people, analysts and policy makers are typically excluded from Chinese-language scholarship, analysis and commentary, or are often limited to ‘executive summary-type’ articles from ‘business-literature’ outlets. We hope to fill at least part of the gap in the story of China, past, present and future with nine up-to-date surveys on some of the critical issues facing China, which have been written by leaders in the relevant fields of scholarship.

China's rapid economic growth and development was reinforced by industrialization, mainly driven by export-oriented and labor-intensive industries in Eastern China's coastal cities, and urbanization. Between 1990 and 2011, urban areas expanded 3.4 times and the urban population increased 2.3 times (CSY, 2012).1 This fast urbanization proceeded despite stringent constraints imposed by a household registration system, the Hukou system. A survey by Wang (2009) and PTSPLT (2011) discovered that approximately 220 million people of the urban population are rural migrants living in cities without having obtained the formal status of urban household registration. Migrants without urban registration only have limited access to most welfare entitlements and basic public services, like education for their children, and are excluded from many urban jobs. This differentiation between migrants and native urbanites is creating serious social problems and contributing to China's rising inequality. Many argue (e.g. Xia and Liu, 2012) that China's current urbanization exhibits a relatively low quality of life, fails to fully play its role in creating market demand and supply and, due in part to the effects of the Hukou system, creates an environment that is not well integrated with national social and economic goals and responsibilities (Ba, 2013). Moreover, industrialization and urbanization have proceeded without agricultural modernization, which is contributing to a large and growing urban–rural income gap (Wang, 2011). For example, by a comprehensive evaluation based on eight indicators (e.g. labor productivity, land output and mechanization), Yin (2011) finds that China's agricultural modernization ranks 51st in the world.

China's industrialization has also occurred in an economy with a relatively low level and growth rate of informatization and the extent to which China is becoming information based lags behind other countries. Since 2003, China's industrial value added has accounted for over 45% of total gross domestic product (GDP), which by Chenery's (1979) criterion suggests that China has entered the middle and late industrialization phases. China's course of industrialization exhibits quantitative expansion with excess productive capacity (Xu and Zheng, 2011), while informatization is still in its growth phase, mainly limited to investment, and its effective integration with industrialization is impeded by technological bottlenecks and interregional barriers (Guo, 2013). Furthermore, according to a survey by Akamai Technologies US, in the fourth quarter of 2011, the world average Internet speed was 2.7 Mbps, while in China it was 1.4 Mbps, leaving China ranked 90th in the world.

The nine papers presented here discuss in detail some key aspects of the Chinese economy, past, present and future. They survey the present and future challenges of the Chinese economy, based upon a rich (ancient) past, yet contested (recent) history, and identify some common themes, such as the household registration system, urbanization, demographic transition, inequality and the sustainability of economic growth.

In terms of China's past, the first article by Deng (2014) presents A Survey of Recent Research in Chinese Economic History, which argues that differing views on China's more ancient economic history have started to converge to a consensus view. However, parts of China's economic history, in particular the more recent history, remain unknown or unresolved to some extent due, in some cases, to taboos. As a consequence, we do not have clear statements to make or analysis to cite relating to the effect that China's more recent history has had on current outcomes. Knowing more about what conditions were important for China's modernizations is important, not only for China, but as potential lessons for other countries and Deng appeals for more work on China's economic history.

For China's present and future, the central government has proposed a goal of ‘economic and social development’. In October 2010, the 5th Plenum of the 17th Central Committee of the Communist Party of China (CPC) outlined China's 12th five-year plan and proposed Three Modernizations Coordination, targeted at agricultural modernization synchronized with industrialization and urbanization (Xu, Duan and Liu, 2012). Two years later, in November 2012, the Report of the 18th CPC National Congress explicitly announced a new, grand policy orientation of Four Modernizations Synchronous Development (FMSD), which is aimed at synchronously developing industrialization, informatization, urbanization and agricultural modernization – all with Chinese characteristics. As previously the CPC indicated the need for a significant transition to achieve the goal of economic and social development (Ren, 2012). Secretary General Xi Jinping stated that, within a century of the establishment of the People's Republic of China the goal of economic and social development is to build a modernized socialist China that is prosperous, strong, democratic, culturally advanced and harmonious. A central driver to achieve this goal is the Four Modernizations Synchronous Development. Secretary General Xi Jinping acknowledges that the FMSD will be a long process with contributions over several generations, a ‘two-century’ timeline, divided into several stages based on the developing speed and complexity of the problems to be resolved.

Some of the critical issues facing modern day China are addressed in the papers presented here. In the second article Demographic Transition and Labour Market Changes: Implications for Economic Development in China, Du and Yang (2014) discuss China's demographic transition, which has been influenced by strict population control policy and coincided with rapid economic growth. However, China's changing age structure, i.e. a declining fertility rate and an ageing population, is occurring at a much faster pace than was projected by the government and has led to labor market shortages and rising wages. Population control policy is not the only influence in families’ decisions to have children but other factors, such as income growth, increased educational attainment and urbanization, also have been important and the impact of these effects likely has been underestimated in government population projections. A further challenge facing China is that its population has started ageing while China remains a middle-income country without a comprehensive social protection system to support the elderly.

Pension reform, which became a prerequisite for restructuring state-owned enterprises and labor market reform because of the lack of portability of pension benefits, has been on-going since the late 1980s and, as Cai and Cheng (2014) discuss in Pension Reform in China: Challenges and Opportunities, a three-part pension system was introduced in 1997. The first part of the pension system is a basic pension plan, which provides employees with a defined benefit. The second part consists of a defined contribution system under which employees and their employers contribute to individual accounts and the third part is voluntary pensions. However, despite three decades of reform China's pension system remains incomplete. Critical issues that need to be addressed are that the current system is only available to urban workers and local government employees in rural areas, its operation is fragmented by decentralized financial and administrative management, it is fiscally unsustainable in part because of low compliance and faster than expected population ageing, and individual accounts earn low rates of return mainly due to investment restrictions and underdeveloped capital markets in China.

Another cornerstone of China's reforms was housing. Housing reform was launched in 1978 and centered on rent reform, the privatization of public housing and the build-up of a housing market. The Evolution of the Housing Market and its Socio-economic Impacts in the Post-reform People's Republic of China: A Survey of the Literature is the focus of the fourth article by Chen and Han (2014). As one might expect, the housing sector has been growing rapidly coinciding with sustained high economic growth, internal migration and expanding urban centers. News coming from many local and international sources suggest that the Chinese housing market has entered a bubble-period of price growth, partly as a result of government policies and incentives and/or supply side factors. However, Chen and Han find that empirical evidence on whether or not China has a housing bubble is inconclusive and conclusions largely depend on the definition of what constitutes a bubble that is applied. They suggest that more work is required in this area before a bubble phase can be confirmed – a difficult effect to isolate in any economy and not just China.

Urbanization, which has been a fundamental driving force behind the evolution of China's housing market, is considered in more detail by Lu and Wan (2014) in Urbanization and Urban System in the People's Republic of China: Research Findings and Policy Recommendations. The household registration or Hukou system has been a major issue in China and as Lu and Wan discuss has led to lagging urbanization as well as efficiency losses arising from too many small cities and larger cities not being large enough. The authors, among other things, propose a quota system under which long-term migrants convert their rural residential land to construction-use land, which is transferred to the city of their employment for urban expansion. Such types of proposal will be important to consider if the known inhibitors to the success of the Four Modernizations Synchronous Development are to be removed. The Hukou system is one such impediment to the future, equitable growth of China's economy and society, yet like many other challenges facing China, it is a fundamentally difficult one to resolve.

The Hukou system has also been contributing to rising income inequality as discussed by Wang, Wan and Yang (2014) in Income Inequality in the People's Republic of China: Trends, Determinants and Proposed Remedies. A large proportion of China's population still lives in rural areas and the Hukou system prevents many potential migrants from sharing the growth dividends in urban or coastal areas. The urban–rural gap is in fact the dominant component of overall inequality in China and while there is consensus that the Hukou system must be reformed, as highlighted in the Decision on Major Issues Concerning Comprehensively Deepening Reforms, adopted at the 3rd Plenum of the 18th Central Committee of the Communist Party of China, comprehensive reform at the national level remains a daunting task. Moreover, reform of China's fiscal system is considered by Wang, Wan and Yang to be another important driver of positive change.

China's industrialization has largely been led by labor intensive and export-oriented industries in urban and coastal areas. However, industrial production, which is the main source of local and global pollution, has been shifting since the mid 2000s with rising labor and land costs in coastal cities. In The Evolving Geography of China's Industrial Production: Implications for Pollution Dynamics and Urban Quality of Life Zheng, Sun, Qi and Kahn (2014) analyze the effects of China's changing industrial geography. In particular, the authors highlight the current trend to shift industrial production from the original coastal preference to inland cities, which, to some extent, has helped reduce regional inequality. It has also lowered the Pigouvian social cost of industrial production in terms of pollution in China, with consequent quality of life effects. More people have benefitted from a reduction in pollution than have suffered from an increase as coastal areas tend to be more densely populated than inland cities. Moreover, the use of cleaner, internationally sourced technology has resulted in some reduction of emissions, however, the overwhelming dependency on coal as a major energy source, especially to produce electricity, remains a concern for the future. Reducing the use of this cheap source of energy, which is fuelling China's industrial production, in order to meet international pressures for lower emissions, will continue to be a source of tension.

China's economic growth over the past decades has been spurred largely by economies of scale in labor-intensive industries rather than through invention and innovation. However, with demographic transition and rising labor costs innovation capability is becoming a more critical factor for sustaining economic growth and it is the topic of discussion by Fan (2014) in Innovation in China. Fan demonstrates that although China's innovative capacity is now growing rapidly, the spatial distribution of capabilities remains uneven across China's regions. Moreover, the rapid catching-up of China to be, in some areas, competing directly with established, innovative intensive countries is quite different from other newly industrialized economies. The Chinese approach seems to have initially involved significant in-house research and development (R&D), to be replaced now by a much more globally integrated approach, particularly in the area of telecommunication equipment manufacturing. Like many of the surveys presented in this book, the call from Fan is for further study and research and one particularly interesting and important example, but yet largely neglected issue, relates to the impact of international labor migration and Chinese returnees.

China's industrialization policy, which typically has favored exports of manufactured goods and heavy industries, has started to encourage high-tech manufacture and services and China's Service Trade is the topic considered by Chen and Whalley (2014). In this final article, the authors argue that although the development of China's service trade still lags behind merchandise imports and exports, despite high growth rates recently, service trade already has had large effects on China's economic growth, employment and technology diffusion. Even more major impacts are expected in the future and growing service imports and exports are projected to significantly affect global trade and foreign direct investment. According to Chen and Whalley, liberalization of service trade has the potential to lead to considerable increases in China's and the world's gross domestic product and the international migration of people is becoming an increasingly important aspect of trade in services.

The nine surveys presented here fill some gaps in the story of China, past, present and future. However, much more analysis and research on the Chinese economy is needed to help avoid some of the negative consequences of rapid economic growth in particular, growing income and spatial inequality.

Note

1

. Land urbanization and construction have grown faster than the urban population (Ba, 2013) leading to many ‘dead cities’ nationwide.

References

Ba, S. (2013) Agricultural population urbanization is the first priority.

China Economic Times

4: 12 (in Chinese).

Cai, Y. and Cheng, Y. (2014) Pension reform in China: challenges and opportunities.

Journal of Economic Surveys

28(4): 636–651.

Chen, H. and Whalley, J. (2014) China's service trade.

Journal of Economic Surveys

28(4): 746–774.

Chen, J. and Han, X. (2014) The evolution of the housing market and its socio-economic impacts in the post-reform People's Republic of China: a survey of the literature.

Journal of Economic Surveys

28(4): 652–670.

Chenery, H.B. (1979)

Structure Change and Development Policy

, New York: Oxford University Press.

CSY (2012) [

China Statistical Yearbook

], Beijing: China Statistics Press (in Chinese).

Deng, K. (2014) A survey of recent research in Chinese economic history.

Journal of Economic Surveys

28(4): 600–616.

Du, Y. and Yang, C. (2014) Demographic transition and labour market changes: implications for economic development in China.

Journal of Economic Surveys

28(4): 617–635.

Fan, P. (2014) Innovation in China.

Journal of Economic Surveys

28(4): 625–645.

Guo, X. (2013) To strengthen the integration and interaction, promote the “four modernizations synchronization” development.

Agricultural Economics and Management

1: 5–6 (in Chinese).

Lu, M. and Wan, G. (2014) Urbanization and urban system in the People's Republic of China: research findings and policy recommendations.

Journal of Economic Surveys

28(4): 671–685.

PTSPLT (2011) [Project Team of Studying Problems of the Rural Labor Force Transfer in the Process of Urbanization]. Rural labor transfer in the process of urbanization: strategic choice and policy thinking.

Chinese Rural Economy

6: 4–14 (in Chinese).

Ren, Q. (2012) The synchronisation of four modernizations is the cognitive leap of information.

Journal of the Party School of Tongren Municipal Committee of CPC

4: 22–25 (in Chinese).

Wang, S. (2009) Capital advantage: the core advantage of economic development in Beijing.

Expanding Horizons

5: 57–60 (in Chinese).

Wang, Y. (2011) On the coordinated development among the industrialization, urbanization and agricultural modernization in central plains’ region.

Academic Journal of Zhongzhou

3: 73–76 (in Chinese).

Wang, C., Wan, G., and Yang, D. (2014) Income inequality in the People's Republic of China: trends, determinants and proposed remedies.

Journal of Economic Surveys

28(4): 686–708.

Xia, C. and Liu, W. (2012) The empirical study of coordinated development between modernization of agriculture with urbanization and industrialization.

Agrotechnical Economics

5: 79–85 (in Chinese).

Xu, D., Duan, S. and Liu, C. (2012) Research on the internal mechanism of interaction and synchronous development among coordinated industrialization, urbanization and agricultural modernization−based on the theory of synergetic and mechanical design.

Issues in Agricultural Economy

2: 8–13 (in Chinese).

Xu, G. and Zheng, J. (2011) Research on the strategies and countermeasures to promote the integration of information technology and industrialization.

New Century Library

10: 3–6 (in Chinese).

Yin, C. (2011) Rational thinking and strategies to promote the synchronization of three modernizations: report on the 2011 Annual Conference of Chinese Agricultural Economic Association.

Issues in Agricultural Economy

11: 8–12 (in Chinese).

Zheng, S., Sun, C., Qi, Y. and Kahn, M. (2014) The evolving geography of China's industrial production: implications for pollution dynamics and urban quality of life.

Journal of Economic Surveys

28(4): 609–624.

2A SURVEY OF RECENT RESEARCH IN CHINESE ECONOMIC HISTORY

Kent Deng

London School of Economics

1. General Introduction: The Field of Economic History of China

China's recent economic performance has transformed a visibly traditional economy, in which over 70% of the country's work force was employed by the farming sector at the point of Mao's death in 1976, beyond recognition within just two generations. With its unbroken economic growth for three decades, China has also become the largest exporter and the second largest economy in the world. China has now become more industrial, more commercial, more urban and more affluent since her glorious ‘Song Economic Revolution’ in the 10th to 11th centuries. In this context, not only do outsiders want to know more about China and its long history, but also Chinese themselves become more and more motivated to understand their own past.

Looking back, China attracted research interests in the West as early as the time of Jesuit missionaries during the late Ming Dynasty (Ming: 1368–1644). Marco Polo aside, at the early stage what appealed to the outsiders like Matteo Ricci (1552–1610), Giulio Aleni (1582–1649), Sabbatino de Ursis (1575–1620), Johannes Schreck (1576–1630) and Johann Adam Schall von Bell (1592–1666) was undoubtedly China's unique culture, its stable state and its liberal and well-to-do economy. The early reports by these missionaries on China served as a source of aspirations for the European elite.1

China's prestige was tarnished from the late 19th century onwards by which time the Jesuits had long stopped operating on China's soil (following the 1733 order of Pope Clement XIV). China's old positive image of confidence and tranquillity was steadily replaced by a new negative one of conservatism, corruption, arrogance, ignorance, incompetence and chaos, which in turn altered China's impression on the international stage from the ‘Wonder of the Orient’ to the ‘Sick Man of Asia’.2 From then on until the end of the twentieth century, there was a consensus that a European model of growth and development – be it Adam Smith, Bismarck, Peter the Great, or Lenin and Stalin – was needed to save China from alleged cultural, political, territorial and economic bankruptcies.3 Indeed, the vast majority of Chinese reformers and ‘revolutionaries’ from the late 19th until the late 20th centuries were brought up in some ‘anti-traditional’ and ‘Eurocentric’ ways.4

The fundamental reason for this new attitude to occur was the adoption by the Chinese elite of the seemingly scientific ideology of Social Darwinism, which justifies ‘social struggle’ and radical changes/revolutions. This ideology was closely entwined with another European idea of ‘nationhood’ or ‘nationalism’ which linked social struggle and revolutions directly to China's territorial unification and integrity.5 Among that generation of the Chinese elite, the main issue was how to make China another Europe.

In this context, why China failed (or why China did not progress from its archaic success) in accordance with a ‘universal’ (synonymic for ‘European’) standard has become the repertoire topic in Chinese economic history. There have been two main debating points here. The first is ‘Needham's Puzzle’ in regard to science and technology; and the second, ‘budding capitalism’ (or ‘sprout of capitalism’) in terms of unfavourable socio-political and economic systems for a full-blown capitalism.6

‘Needham's Puzzle’ stems from Joseph Needham's multi-voluminous Science and Civilisation in China in which China seems to have been a centre of creativities, inventions and innovations for a long time.7 How China was able to get there and what China did with her inventions and innovations in history have been debated.8 Here, the puzzle is deeply rooted in the general and normative impression that a traditional agrarian economy should be subsistent (or ‘Malthusian’), backward, conservative and ignorant. It produces no science. Indeed, most Marxists and a great many traditionally trained historians believe that the social conditions in traditional China such as Confucian ideology (either classical Confucianism or ‘neo-Confucianism’), education for bureaucrat recruitment examinations, government rent-seeking, landlordism, low wages, and so forth were incompatible with the sort of achievements in science and technology portrayed by Needham. On the other hand, if China was so ahead of the rest of the world, why China stopped and did not enter modernity. This is baffling from a Eurocentric perspective.9

In tackling this puzzle, arguments are often circular: for example, China failed because it lost all its wars with invaders (until 1945); China lost, because it did not have modern technology; China did not have modern technology, because China was unable to develop them. Such logical plight shows rather accurately the state of the play in Chinese economic history.

Related to Needham's Puzzle is the notion of ‘budding capitalism’ in traditional China. China's markets, moneys, bills of exchange, merchant capital, business contracts, wage labourers, profit making and so forth have all been counted as ‘capitalistic’.10 The vision of budding capitalism is deeply rooted in the Marxian notion of linear and teleological ‘development stages’ which China never followed historically: by 1950, China's ‘national bourgeoisie’ counted for less than 0.2% of China's total population.11 China's alleged slavery and feudalism has turned out to be groundless.12 The problem here is if China only managed to have the sprout of capitalism over a millennium since the Song period (960–1279), that sprout may have not been ‘capitalistic’ at all. Discussions have usually ended with a list of defects and constraints in China's indigenous mindset, institutions and resource endowment that stopped China from becoming another Europe.13 External shocks and destruction from the Mongols during the 13th century and from modern powers after 1840 have also been attributed to.

Karl Marx himself at least had the decency to admit that his developmental stages did not apply to Asia. Thus, he created the ‘Asiatic Mode of Production’. What he did not realise is the fact that with one of the largest political units and populations in world history China should be the developmental norm instead of a developmental exception.14 Historically speaking, Europe indeed once modelled after China, not the other way round.15 That China was no longer viewed as a role model by Europe came rather late.16 Moreover, capitalism was transplanted in Asia, China included.17 The best example is Tokugawa Japan where a full-grown feudalism did not lead to capitalism until the visit by Commodore Matthew Perry in the mid-19th century.

Another problem was that Eurocentric ideas (Social Darwinism, ‘revolutions’, and so forth) did not fare all that well in China. Maoism (1949–1976) was littered with power struggle among communist leaders and mismanagement of the economy by a party-state in obvious cases such as the 1959–1962 Great Leap Famine and the 1966–1976 Great Proletarian Cultural Revolution.18 The debate is still going strong with the increasing amount of de-classified materials for the Mao's era.

2. New Development During the Last Two Decades

Coincided with China's recent phenomenal economic growth spurt, the most noticeable development since the 1990s has been the rise in studies of ‘one period’ and ‘two approaches’. The ‘one period’ is that of post-1750 when Western Europe succeeded in industrialisation. The two approaches are ‘global’ and ‘Sinological’. The former accepts China conceptually as a global norm, parallel with the West;19 and the latter bends towards ‘China exceptionalism’.20

2.1 Re-thinking China in Global History of Post-1750

China's achievements in the pre-Industrial Revolution era have long been viewed as largely ‘unexplained’ from an idiosyncratically agrarian society. Such a verdict seems to be out-dated in the wake of the emergence of the ‘California School’.21 In a nutshell, the California School argues that pre-modern China was more socially mobile and better governed than Western Europe. After all, China was where the globally circulated silver went in exchange for China's unique products of silk, porcelain and tea. So, it was not teleologically inevitable for Western Europe to catch up with and then surpass China. Rather, it was to a great extent accidental: because of the European processions of unique resources, known as the ‘coal and colonies thesis’.22

The California School challenges the very cornerstone of Western economic thinking, which places production efficiency (which is a supply-side story) or productivities (labour, capital and total factor) at the very centre of all intellectual inquiries, and offers an alternative parameter such as living standards, which are a demand-side story. The methodology of the California School is simple: ‘a country was what it ate’. From the viewpoint of final consumption of the population, China was on a par with Western Europe until 1750, the California School has concluded. Such a shift in parameter is very innovative, shedding new light on many old issues of growth and development in human history. Inevitably, questions and doubts have been raised on samples and data used by the California writers.23 But, on the whole, the new framework has been well accepted.24 It created a shock wave known as the ‘Great Divergence Debate’ in the past decade. The ripple of the debate can be felt in China where the academia has been trailing the debate with enthusiasm.25

In the mid-2000s, the debate took a direction known as the ‘real wage divergence’ led by Robert Allen. The new debate sticks to the Great Divergence label; but the similarity stops there. Real wage analyses intentionally produce various league tables of ‘earning power’ of the unskilled labour in different economies. This is unmistakeably a return to the neo-classical tradition of productivity and production efficiency. Not surprisingly, the Real Wage School has reached conclusions that real wages in Western Europe were persistently higher than in China from very early on.26 With the help of historical national income reconstruction,27 the Real Wage School has gained a great deal of millage.28 The California School has been on the defence lately.

2.2 ‘Sinological Approach’ Regarding China's Own Performance in Post-1750

Together with the onset of the Great Divergence debate, an increasing number of historians have departed from the Marxian unilinear framework in the past two decades. Such a trend has yielded a range of new works on China done in the West. Firstly, there is the ‘Frank-Flynn Thesis’ on a silver-cum-world economy in which Ming-Qing China was positioned in the very heart of a global market exchange.29 From 1560 AD onwards, over a period of 250 years, large quantities China-made luxury goods – porcelain, silk and tea – were exported to the rest of the world in exchange of large quantities of silver which China did not produce.30 This new insight seriously undermines the notion that China was insulated from the outside world and trapped in a growth impasse.31 Rather, China ran an open and dynamic market economy, which interplayed actively with the West.

Secondly, there is a trend to re-calculate China's growth performance.32 It has been suggested that China was once a global economic superpower in GDP terms.33 There has been a renewed effort to calculate China's national income, a tradition which began in the 1940s.34 Many new works are linked to the Great Divergence debate.35 There was also the debate of living standards per se.36

This new development has given many scholars, especially those inside China, newfound confidence. Among historians inside China, the focus has increasingly been placed on conduciveness of China's indigenous institutions and incentives for growth and development. In the past two decades, research by the Chinese academia has taken in two directions. One is that of positivism to replace the dogmatic Marxian normativism or Eurocentrism. Works are more willing to show achievements made by the Empire of China instead of miseries caused by alleged class suppression and exploitation. Three successful dynasties, the Song (960–1279), Ming (1368–1644) and Qing (1644–1911), have now received the renewed attention. Scholars now argue that Song China made so many breakthroughs in farming, mining, metallurgy, manufacturing, media, commerce, urbanisation, social mobility, governance, consumption and living standards that Song society looked rather modern.37 These findings justify the notion that China was a genuine donor of technology and institutions to the outside world.38

The other direction is to re-investigate and re-interpret China's political economy and performance of the economy in the late Qing Era when China allegedly went downhill. A path-breaking work by Gao Wangling argues that the rent level in late Qing China was low and the notion of excessive rent-seeking by the landlord class was groundless.39 His evidence comes from well-entrenched customary practices in rural China where rent obligation was relevant only to officially registered land (zhengtian). Crops from hill sides and riverbanks or incomes from by-employment and market exchange (e.g. sales of home-made textiles, home-grown vegetables and domestic animals) paid no rent. Moreover, only the main crop bore rent. The second crop was rent free (typically winter wheat and the second cropping of rice in autumn). Furthermore, tenants’ housing provided by the landlord was free. Therefore, although the nominal rent rate was commonly stated as 50–60% of the tenant's output,40 this was by no means the real rent burden. In real terms, the tenant retained 70% of his total annual output, not counting his free housing. The notion of excessive exploitation by the landlord class collapses.

In addition, there was a common practise of ‘rent paid in advance’ (yazu). The old Marxian School views it as the hard evidence for landlords taking advantage over poor and powerless tenants. The new findings indicate that tenants were willing to make such rent advance not because of the exploitive pressure from greedy rentiers but because it was a good business deal for the tenants: by paying the annual rent up front, the tenants made a capital loan to landlords. The latter had to either pay an interest of 12–14% a year to the tenants,41 or reduce the tenants’ rent by half.42

This new insight explains well the lasting puzzle that life style of the average tenant was very similar to that of an owner-tiller in the late Qing, known as ‘tenants becoming middle-income peasants (zhongnong)’.43 The traditional Marxian historians always firmly deny such a trend not because the middle-income tenants never occurred but because their prejudice against the landlords does not allow tenants to be well off.

Research has also indicated nuances regarding the term ‘landlords’ thanks to China's sophisticated sub-division of freehold rights of the same plot. Under sub-division arrangements, there was the ‘pseudo-absentee landlord’ who possessed the ‘subsoil’ (tiandi) and the ‘pseudo-tenant’ who owned the ‘topsoil’ (tianmian) and ran the farm. The former, often an absentee, had no power to interfere in the business of the latter.44 The key issue is why farmers (here ‘topsoil owners’) wanted to sell the ‘subsoil’ to a stranger. The Marxian explanation has always been poverty suffered by the former. It has now been clear that many topsoil owners were not poor. They allowed outsiders to purchase the subsoil as a way to attract urban capital investment, similar to a company's offering shares to the public. To protect their control of the farmland, the price for topsoil ownership was much higher than that for the subsoil ownership of the same plot.45 In this duel ownership, the absentee investor, often urban, was able to expect an annual dividend from his capital investment in the farm at about 10% of the output which was still called ‘rent’. The output retention rate for the topsoil-owner was 90%.46 There was no obvious reason for the two business partners to engage in class struggle of the Marxian type. All these new findings of the Qing rural economy fundamentally challenge the very core of the dogmatic interpretation of the political economy of rural China as ‘feudal’ and the allegation of excessive rent seeking by landlords.

Similarly, new findings by Lin Wenxun on the well-to-do stratum (fumin jiecen) show that there was no definite link between private wealth and political privilege from the Tang to the Qing.47 It is compatible with various studies of China's low tax regime under the empire system that allowed ordinary citizens to accumulate personal wealth.48

Meanwhile, research into China's demography gained its momentum in the past two decades.49 It has become clear that rational choices prevailed at the household level regarding the number of children a family was prepared to raise, successfully argued by James Lee and Wang Feng.50 Li Bozhong went a step further to argue that Chinese families practised the prevention check with methods and approaches not too different from what are available in the modern world today.51 Such studies challenge the stereotype that all traditional societies were ignorant and thus suffered from their own miscalculations between their population sizes and their resource bases.

The most significant progress by far has been made in the regional growth performance in China. It has been argued that during the Qing Period when large quantities of luxuries were exported from China in exchange for foreign silver, the Yangzi Delta moved steadily towards a mixed economy of farming, manufacturing and services.52 This view is echoed by a case study in North China, which shows that the delta was not alone.53 Economy-wide, China was clearly moving towards modernity.54 Such studies are highly compatible with the literature on China's top-down ‘Westernisation Movement’ of the late Qing. Now, whichever way one looks at the late Qing economy, there has been little evidence so far for the Maoist claim that China was ‘poor and bleak’ (yiqiong erbai).

Remarkable progress has also been made in the study of 20th century China. Four sub-periods have received most attention: the Nanjing Decade (1927–1937), Japanese Manchuria (or ‘Manchukuo’, 1931–1945), the Maoist Period (1949–1976) and the post-Mao era (post-1976) with three major issues. First, economic performance during the Republican rule is no longer so politicised. A fast growth during the Nanjing Decade is revealing in a combination of private initiatives and government promotion, including the restoration of China's customs autonomy.55 There can be little doubt that if China had continued without the Japanese destruction, the country would have reached full modernity by the 1960s.

Some modern growth occurred in Japan-controlled Manchuria.56 But such growth was achieved at the expenses of resources and human lives in that region. In other words, it was a false economy, very similar to the growth in Nazi-controlled Europe. So, there is a serious moral issue whether one should romanticise such a growth pattern any longer.57 The issue of the aftermath of the growth in Manchuria is no longer a taboo. It is now openly discussed how the Soviet Union became the main beneficiary of the Japanese investment in Manchuria. It was no secret that Stalin's Red Army stripped Manchuria of much of its industrial assets worth a total of US$ three billion (at 1945 prices).58 So, growth had to start in Manchuria all over again.

There has been a tendency to de-politicise and de-glorify economic performance under Mao's rule. Unnecessary social and private costs incurred under Mao's rule have been open to scrutiny, regarding the destruction of China's human capital during the Great Leap Famine in which 30–40 million died,59 during the political purges from the 1950s to 1970s in which intellectuals were systematically targeted, and during the Cultural Revolution when high schools and universities were all shut down.60

The notion that Maoism laid the political, ideological and physical infrastructure for China's economic take-off under Deng Xiaoping has also been challenged, when one takes into account of the absence of economy-wide technological progress and the lack of capital depreciation in China's industries.61 The truth has come out that China's growth performance under Mao's rule was both wasteful and unstable.62 The most powerful evidence is from investment performance of the Maoist economy. It was documented that under Mao the amount of annual investment was a quarter of China's GDP. It was also claimed that after 1957 one yuan investment would yield one yuan worth of GDP.63 If so, over 25 years from 1952 to 1977 China's capital stock should have grown 264.7 times of its starting size (i.e. from 24.1 billion yuan to 6379.3 billion yuan). However, the registered state-owned fixed capital assets (guding zichan) in 1978 were mere 448.2 billion yuan (constant price).64 This means that the investment waste rate was a staggering 90%. As a result, by the end of Mao's rule, the structure of the Chinese economy was still traditional with the primary sector as the main provider of employment according to the official statistics (% in total).65

Primary sector

83.5

81.2

82.1

81.6

80.8

77.2

One also faces statistical discrepancies when comparing Mao's employment structure with China's GDP structure: the industrial sector allegedly produced 49% of China's total GDP (as in 1978),66 but Mao's ‘modern industrial workforce’ never exceeded 7% of China's total population and its growth rate was lower than China's population, suggesting that China's industrialisation process stalled.67

Industrial workforce (I)

Total population (II)

I/II (%)

1959

45.5 million

672.1 million

6.8

1974

59.1

908.6

6.5

Annual growth (%)

1.76

2.03

Similarly, China's urbanisation level dropped by 1.8% from 1960 to 1978.68 Does this suggest that Mao's industrial workforce was so productive that it performed 700% above China's national par? Or, does this 49% GDP share merely come from ‘creative accounting’?

An increasing number of works have re-examined other aspects of Mao's economy. It has become clear that Mao's government was excessively rent seeking for ‘primitive accumulation of capital’. The main device was ‘scissors pricing’ which intentionally inflated China's industrial GDP and deflated its agricultural GDP to make the economy look industrialising on paper. The monopolistic rent between the two scissors prices served as a stealth tax. Only the rural sector bore that tax. Estimates made by Chinese scholars indicate the total gain by the Maoist state from the scissors prices was astonishing (in billion yuan):69

Wen

Li

Wang and Zhang

Cui

Zhang

et al.

1952–1986

–

–

–

–

582.4

1953–1978

800.0

337.6

949.5

–

–

1955–1978

767.8

–

–

–

–

1960–1984

–

–

–

428.3

–

Given that from 1952 to 1978 the net increase in the Maoist state-owned capital stock was 424.1 billion yuan (or 448.2 billion yuan at current prices), the entire capital stock of the Maoist economy had to come from the peasantry.

The direct impact of Mao's rent seeking was the concentration of wealth in the hands of the state on one hand and widespread poverty in society on the other. Evidence comes from changes in bank deposits (% shares):70

State deposits

Citizens’ deposits

1979

76.5

23.5

By 1978, about half of all households in China were below the official poverty line; in the rural sector, the proportion was 65%.71 Moreover, the agricultural sector suffered from deep recession, which jeopardised China's food security:

Agricultural GDP in the 1952 price (in billion

yuan

)

72

1952

41.7

1977

29.0

Gross annual growth%

−1.4

Net annual growth%

−3.4 (after population growth)

Food imports (in 10,000 tons)

73

South China

North China

China as whole

1956–1960

–

472.0

–

1976–1978

22.8

1106.4

1129.2

Furthermore, the decline in China's input in science and technology lowered the technological content of China's physical capital. By the time Mao died, much of the capital stock was made of ‘junk capital’ with little market value. In a survey of 50,000 state-owned firms conducted in 1992, 62% lost part of their capital value, and 23% only had negative equity.74 By 2000, the state sector had still remained the least efficient in the economy: its productivity was 60% lower than the non-state sector's.75 Mao's state-run industrial growth was far from being a success story.

Finally, in terms of a ‘human development index’ (HDI), Maoism did not score high, either. In terms of mass education, the best record under Mao was 1964 when only 0.6% of the population received some forms of tertiary education; 34% remained illiterate.76 Only after 2000, were over 90% of the rural Chinese able to read and write.77 Mao's China had a very high infant mortality rate: in 1965, China's infant mortality rate was 165 per 1000.78 The same level of infant mortality applied in 2004 only to the poorest countries on earth with low life expectancies of around 40, including Afghanistan, Angola, Liberia, Niger, Sierra Leone and Somalia.79 To reach life expectancies over 60 years, something that Mao's regime boasted to reach, a country has to sustain an average of 26 hospital beds for every 10,000 people.80 But by 1981, China had just two million hospital beds and 1.2 million registered medical doctors.81 On average, there were five hospital beds and three doctors for every 10,000 population, hence putting Mao's China on a par with less developed countries such as Afghanistan (as in 2001), Cambodia (2004), Guatemala (2003), Myanmar (2000), Somalia (1997) and Yemen (2003).82 The widely circulated claim that Mao's China doubling its life expectancies has now become seriously suspicious. The United Nations has re-numerated a 55% increase in life expectancy for Mao's China, cutting China's life expectancies under Mao by at least 10 years.83

Research into post-Mao reforms has mixed results. There can be little doubt that Deng Xiaoping's new policies successfully jump started China's stalled growth and development. So much so, the new growth after 1978 has comfortably redeemed Mao's wrongdoings. However, a range of issues has emerged regarding growth sustainability and social equality in several areas. First, China uses 15% of the world's energy, 30% of the world's steel and 54% of the world's concrete to produce only 5.5% of the world's GDP (2006).84 To produce one unit of GDP China used 2.5 times more energy than India, four times more than the United States and seven times more than Japan (as at the end of the 1990s).85 To demonstrate this problem, China is the largest steel producer in the world. But that has been achieved by a great many small producers: 3000 of them in total (as in 2000) whose efficiency has been suboptimal.86 Secondly, China's distinctive input-driven growth model has made China a pollutant superpower in the world. Inevitably, China faces a huge bill to clean its air, water and soil, a bill which may significantly slow the country's growth and development in the near future. Thirdly, as China has become an open-and-large economy, its growth depends on other economies to provide China with raw materials, investment capital and advanced technology on the one hand and to absorb China's increasing outputs on the other. Here are the basic facts: China exports about 40% of its GDP and about 70% of the economy is linked to exports. However, as much as 90% of China's exports are manufactures which are price and income elastic, which means that China's export sales are not always guaranteed. Any slowing down in the world economy will put a brake on China's growth, apparent from the impact of the 1997 Asian Financial Crisis and 2008 World Financial Meltdown.

A way out seems either to speed up China's domestic consumption on the demand side or to slow down the current growth on the supply side; or a bit of both. But neither is easy. China's total wage bill (and hence its domestic market size) is less than 35% of its total GDP, which does not allow China's domestic consumption to effectively substitute China's exports. China's inventory will inevitably pile up; factories will close down. This is how the market always works. But, to slow down the current growth may be politically dangerous if the unemployment rate rises. In this context, the Chinese state has stepped in since 2009, pumping huge sums of money to fill in China's export-cum-demand gap. The government visible hand favours some ‘key sectors’ of the economy to establish monopoly, known as ‘advancing state sector forcing the private sector to retreat’ (guojin mintui).87 But the side-effects are already too obvious in terms of causing market distortion and widespread official corruption.88 It may lead to anything but sustainable growth. But at least, the economy has become more transparent.

3. Directions of Future Research

In the past two decades or so enormous research has been conducted with multiple lines of inquiries. One should feel confident that the momentum of scholarly pursuits will continue given China's increasingly importance in Asia and in the world.

In the field of China's pre-modern history, however, more detailed accounts for China's regional growth and development over the long run still deserve our attention. Comparisons between China's regions and with other countries have proved to be fruitful; more such comparison will still be needed.

Regarding China's economic history of modern time, that is, the post-1750 era, more research is needed in the areas of wars (Japanese invasions, Soviet invasion and civil wars) and political disasters (from mismanagements to purges and alright stupidity and self-destruction) because their impact has remained to a great extent unknown. Some have still been taboos.

Last but not the least, more efforts are needed to investigate the issues related to the state and state-building in China, an issue which was vital but has so far been overlooked.89 Often resource allocation in China was done by the ‘visible hand’. This was particularly relevant in the 20th century. We only have just started realising this research vacuum.

Notes

1

. For example, Lewis (1946) and Hobson (2012).

2

. For example, Weber (1963), Wittfogel (1957) and Pryor (1980).

3

. For example, Fairbank (1978), Fairbank and Liu (1980) and Fairbank and Reischauer (1979).

4

. For example, the Qing ‘Westernisation Movement’ and the ‘Self-strengthening Movement’ during the 1860s throughout the 90s, the bogus ‘Christian’ Taiping Movement in the 1850s and 60s, the Republican Movement and the Communist Movement since the 1900s and 1920s, respectively. Mao Zedong thus asserted that ‘to copy from the Russians was our final conclusion’ and ‘only can [Russian] socialism save China’; Mao (1960, vol. 4, p. 1471) and Mao (1999, vol. 7, p. 214).

5

. Pusey (1983), Dirlik (1989), Chow, Doak, and Fu (2001) and Wei and Liu (2002).

6

. Lin (1995), Brook and Blue (1999), Wang (2001) and Wu (2001).

7

. Needham (1954–1994), Elvin (1973) and Temple (1986).

8

. Jones (1981 and 1990) and Mokyr (1990).

9

. For example, Lin (1995).

10

. For example, Wu (2001), Wang (2001), Wang and Liu (2001) and Liu (2001).

11

. Anon (1969, pp. 69, 70 and 131).

12

. For example, Fan (1964–1965) and Guo (1973).

13

. Li (1981), Liu (2001), Wang (2001), Wang and Liu (2001) and Wu (2001).

14

. See, for example, Wong (1997) and Pomeranz (2000).

15

. Hobson (2012). For an earlier work, see Lewis (1946).

16

. Brook and Blue (1999) and Hobson (2012).

17

. Marx (1976, vol. 6, pp. 477–519) and Warren (1980). In late Qing China, the impact was obvious in the ‘Westernisation Movement’ side by side with unequal treaties; see Gilbert (1929), Yan (1955), Sun (1957), Wang (1963), Jia and Bao (1979), Xu (1986) and Xiong (1994).

18

. For example, Davidson-Houston (1960), Heinzig (1971), Eunson (1973), MacFarquhar (1974, 1983 and 1997), Vladimirov (1975), Stephen (1977), Chinn (1979, pp. 375–394), Lin (1990), Becker (1996), Kung and Lin (2003, pp. 51–73), Zhang and Su (2000), Gao (2000), Chan (2001), Williams and Wu (2004), Chang and Haliiday (2005), Cao (2005), Li (2005), Chen (2005), Gao (2006), Song (2007), Yang (2008) and Dikotter (2011). See also, Rummel (1991).

19

. For example, Wong (1997), Frank (1998), Pomeranz (2000) and Goldstone (2002, pp. 323–389).

20

. For example, Jacques (2009), Zhang (2011) and Lee (2012).

21

. The name ‘California School’ was coined by Jack Goldstone. It includes a group of

avant-garde

historians who all have their purses in California and view the world and world history from a non-Eurocentric (or non-Atlantic) way. They include A. G. Frank, R. B. Wong, Kenneth Pomeranz, and Jack A. Goldstone himself.

22

. Pomeranz (2000).

23

. For example, Vrise (2001, pp. 407–446), Huang (2002, pp. 149–176), Duchesne (2004, pp. 52–81). For a group debate, see ‘Communications to the Editor’ (2003, pp. 157–187).

24

. Manning (2003), O'Brien (2006, pp. 3–41), Allen, Bassino, Moll-Murata and van Zanden (2011, pp. 8–38).

25

. One only has to mention the recent events: the ‘20

th