Unveil China's Economic Miracle

Abstract

For nearly three decades, China has achieved an economic miracle. China's official GDP per capita increased almost tenfold, from about US$150 in 1978 to US$1,449 in 2005. China's growth measured by the purchasing power parity (PPP) has been even more impressive. The GDP per capita in terms of PPP increased more than 21 times. Orthodox economic growth theories have been applied to uncover the secrets of China's miracle by using traditional growth factors, such as capital, labor, and technology, even incorporating geography and institutions, but no highly satisfactory explanations have yet emerged to fully explain the miracle. In this paper, the author, based on 30 years of living and working experience in China, unveils China's miracle from some different perspectives, which have usually been neglected by mainstream economists but may offer the key to uncovering the secrets of the China Miracle. He concludes that China's economic miracle is attributable to the following four main factors - (i) efficient, effective, and growth-friendly economic policy, (ii) two Chinese traditions, namely, the high savings rate and the emphasis on education, and (iii) the historical demographic opportunity (i.e. the population at its prime), and (iv) the deepening of both monetizaiton and division of labor. In particular, the author points out that the last two factors have contributed significantly to China's economic miracle but have not yet been captured by most economic analyses.