What has caused China’s economic growth?

Economic growth is driven by numerous factors. However, traditional economic theory focuses on certain key reasons, while ignoring the impact of other factors. Since 1978, China has achieved unprecedented economic growth, but also faces low per capita GDP. To clarify the driving forces behind this s...

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Bibliographic Details
Published in:Economic systems 2022-06, Vol.46 (2), p.100982, Article 100982
Main Authors: Guo, Jiahong, Lai, Xiaoying, Lu, Chenxi, Cao, Shixiong
Format: Article
Language:English
Subjects:
Contribution analysis
Internal trade
Investment
Panel quantile regression
Privatization
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Summary:Economic growth is driven by numerous factors. However, traditional economic theory focuses on certain key reasons, while ignoring the impact of other factors. Since 1978, China has achieved unprecedented economic growth, but also faces low per capita GDP. To clarify the driving forces behind this situation, we used per capita GDP to represent China’s economic growth and performed total factor analysis based on 13 variables in 7 socioeconomic dimensions using panel data from 30 Chinese provinces over the 40 years since China opened to the west in 1978. We found similar determinants in different regressions. Internal trade, privatization and investment were the primary factors driving Chinese economic development. Surprisingly, we found that the contribution of foreign trade to economic growth (per capita GDP) was weak. Education had a much smaller contribution than science and technology. Using per capita income as the dependent variable to provide a robustness test, we found that China’s income distribution has not paralleled its economic development and the distribution of the benefits of GDP growth to citizens must be improved. China’s experience demonstrates that promoting economic growth requires coordinated development of many factors, and that different policy preferences should be adopted to meet different economic development conditions. •Domestic trade, privatization and investment are driving China’s economic growth.•Foreign trade has surprisingly little effect on economic growth (per capita GDP).•Railways negatively affect less-developed provinces.•China’s government has to get better at distributing the benefits of GDP growth to its citizens.
ISSN:0939-3625
1878-5433
DOI:10.1016/j.ecosys.2022.100982