After more than three decades of opening up and economic reforms, China is now the second largest economy in the world in terms of gross domestic product (GDP). The remarkable economic growth and poverty reduction in China has attracted considerable attention from academics, policymakers, and the public. In particular, much interest has focussed on understanding the factors that drove this spectacular growth, the challenges China now faces, its prospects, its impact on the rest of the world, and the lessons that may be offered to other countries.
This book, edited by four top economists on the Chinese economy and its development, with contributions from leading scholars in the relevant fields, provides the most comprehensive collection of up-to-date perspectives on China's economic growth and development. The topics discussed in the essays that make up the book are wide-ranging, covering both domestic and external factors, as well as growth and development. They include the China model and future prospects for China, trade and the Chinese economy, urbanization, industry and markets, agriculture and urban development, population and labour, well-being and inequality, health and education, gender equity, as well as regional growth and divergence. Instead of providing surveys of the existing literature, the book ‘constitutes a picture of the concerns of modern economics as it is applied to China's problems, as seen by the leading economists working on China’ (p. 1).
China's growth and development over the past three decades have two significant features. The first feature is the impressive economic growth and poverty reduction on the one hand and the increasing inequality between regions on the other. The second feature is the rise of the economic power of China on the one hand and the increasing constraints on resources, environment, and the external economic and political environment on the other.
The book correctly highlights these features: remarkable economic growth coupled with mixed performance in social development – e.g. growth inequality, spatial divergence, and an underclass of migrant workers – and environmental pollution. The book states that ‘these twin dimensions frame the economics of China as it looks ahead to the next four decades, approaching the 100th anniversary of the People's Republic in 2049’ (p. 1).
The book, without any doubt, presents us with thorough and in-depth discussions of these aspects of the economics of China, especially from the inclusive and social development perspectives. Good examples are the discussions on the success and weakness of the China model and distribution inequality, the future prospects for China in terms of development challenges and an inclusive growth strategy, urbanization, migration, well-being and inequality, health and education, gender equity, as well as regional divergence and disparities. This multi-disciplinary approach leads to a thorough understanding of China's growth potential from a social sustainability perspective.
Environmental sustainability represents another major challenge in China's attempts to sustain long-term economic growth, and four interesting essays in the book provide expert perspectives on this dimension. However, given the importance of resource constraints, environmental pollution, water resource management, and climate change, which place considerable constraints on China's growth potential, the volume should have devoted more space to China's policies and evolving capabilities in developing green technology, renewable energy, and the so-called strategic emerging industries.
On the external dimension, the China miracle would not have come into fruition without China's openness to trade and foreign direct investment (FDI) and increasing integration into the world economy. The volume contains excellent and thoughtful discussions on China's engagement with the world economy through trade, focussing on China's trade and industry policy, exchange rate policy, tax rebate related export promotion policy, and the evolving composition of China's trade. There are also insightful discussions on China's accession to the World Trade Organization, the trade disputes in which China has been involved, the internationalization of RMB, and US–China economic relations.
Another arm of China's opening-up policy, namely China's openness to both inward and outward foreign direct investment (FDI), unfortunately does not receive the attention it deserves. Inward FDI has contributed to China's economic growth, not only in terms of development financing but also in terms of the transfer of technological and managerial knowledge through training, and the effects of demonstration, knowledge spillovers, and competition. Since the introduction of the ‘go global strategy’ in 2000, outward FDI from China has also increased exponentially. This outward FDI is expected to facilitate the expansion of Chinese firms and to provide access to tangible and intangible resources that are of direct relevance to China's development effort, including raw materials and technology. FDI hence becomes an important factor in our understanding of the economics of China and in forecasting the future prospects of China. Of course, both inward FDI and trade have significant implications for income distribution, which should also be taken into consideration in the book's discussion of inclusive growth.
As the book correctly states: ‘Economic development is a process of continuous technical innovation, industrial upgrading and structural transformation.’ China is now a middle-income country with keen ambition to transit into a high income country. Looking at the challenges for this transformation, the resources and environmental constraints it faces, and looking forward to China's future growth prospects, there is one key issue that must be fully examined: the country's capacity for knowledge creation, innovation, and technological upgrading. The country has now come to a crucial stage in its technological progress, industry upgrading, and structural change. The book gives masterful macroeconomic accounts of China's development strategies, productivity growth, the reforms of the state-owned enterprises, and the political economics of privatization. Unfortunately, the development of innovation and technological capabilities in China is not discussed systematically and comprehensively. Innovation, which is key to China's economic upgrading and sustainable growth, is only lightly touched on through a brief but insightful examination of the origins and impact of clusters in China.
How has China's science, technology, and innovation policies evolved over the past three decades? To what extent have Chinese firms built up innovation and technological capabilities? What are the major constraints and how can Chinese firms respond to these constraints? What impact does openness to trade and FDI have on innovation in China? How does external knowledge sourcing and international technology diffusion affect this process? How will this dimension affect China's future growth prospects and China's ability to address sustainable development? How should technological progress be directed in a way that nurtures inclusive growth? The book could have examined these issues systematically from an evolutionary, institutional, and innovational economics perspective.
Nevertheless, despite the few limitations discussed above which may be due to its wide ranging-scope of topics, this book is no doubt an important academic achievement, a very comprehensive collection of insights and expert opinions on the economics of a large country, a must-read for anyone who is interested in China, in understanding and unpacking its miraculous, in understanding its current challenges and its impact on the world, in finding strategies for the future of both China and the world, and in learning lessons for development for other countries.
