China's economic growth, 1978-2007: structural-institutional changes and efficiency attributes

Abstract

China's sustained rapid economic growth over the era of its systemic reform is of general importance for late development under globalization. This article seeks to construct an explanation of the experience, which centers on the notion of an evolving development path that embodies an uneasy mix of the attributes of allocative and productive efficiency. In this light, the analytical findings of the article give rise to two main propositions. First, in contrast to the general direction of market reform in the institutional dimension, China's actual path of industrialization and economic growth has rather tended to contradict the principle of (endowment-determined) comparative advantage. It has been in the direction of capital deepening, especially since the early 1990s. Second, China's reformed economic institutions have encompassed both market-supplanting and market-conforming elements. These are represented by state-owned enterprises and non-state-owned enterprises, respectively, with the former accounting for the improvement in productive efficiency and the latter accounting for the improvement in allocative efficiency. The article concludes with a discussion on the significance and policy implications of the findings.