Technological Progress and China's Industrial Structure Upgrading

Abstract

This paper systematically studies the motivations for China's industrial structure upgrading from a perspective of unbalanced growth. Based on the clarification of the empirical facts of changes in China's industrial structure, it makes a numerical simulation by establishing a dynamic stochastic general equilibrium model concerning changes in two-stage industrial structure, and accordingly does a fitting test of the evidence of changes in China's industrial structure. And it analyzes the mechanism of the model economy, and studies the driving factors and mechanism of China's industrial structure upgrading based on the actual operation of China's economy. It comes to the conclusions as follows: firstly, from a supply-front perspective, the relative changes in technological progress rates of light and heavy industries are the motivation for changes in industrial output structure, and higher technological progress rate of the heavy industry than the one of the light industry is the motivation for China's industrial structure upgrading; secondly, technological progress of the heavy industry has the spillover effect on the output of the light industry; thirdly, when the heavy industry has a more rapid technological progress than the light industry, investment rate rises, the percentage of light industry product consumption slows down, and the percentage of heavy industry product consumption remains stable and rises slightly, making the percentage of heavy industry output rise. It provides the following policy implications: firstly, as for the promotion of technological progress, governments should allocate more policy support, human resources, material resources etc to the heavy industry, especially the basic or high-tech industries, rather than the light industry, and promote a higher technological progress rate of the heavy industry than the light industry, thereby powerfully advancing the double upgrading of industrial structure and the manufacturing industry; secondly, governments should establish a unified domestic market, and give tax credit, tax rebates and other policies to support enterprises that invest and produce by using domestic heavy industrial products.