China’s Sustainable Development in Global Perspective

Abstract

In addition to the boost from economic reform, China’s rapid economic growth in the past two decades resulted mainly from the disposition of its surplus agricultural labor and the massive inflow of foreign direct investment, both of which led to its rapid export expansion and high overall growth. This paper argues that the extensive use of foreign capital and the supply of cheap labor in China’s economy are the main driving forces for rapid economic growth in the post-reform period. Yet, sustainable development requires not just the existing supply of cheap labor, but also the necessary capital investment, which may not be forthcoming forever. It is argued that while the agricultural surplus labor is endogenous, the flow of foreign investment is exogenous because there is no guarantee that foreign direct investment will continue. Moreover, trade, which served as an engine of growth in the past, may become a stumbling block in the future. As China reaches the bottleneck of development, the nation will have to decide how to restructure its sociopolitical system to accommodate its sustainable development.