the Model of the Economic Growth, the Model of the Economic Growth, Industrialization and Urbanization in Industrialization and Urbanization in

ChinaChina

NI Pengfei

China‘s economic growth miracle

Over the past 30 years, China's economy maintained at close to 10% of the average growth, which is a miracle.

from the demand point of view, China's economic growth is a major contributor to exports and investment.

Investing primarily by government investment and real estate, infrastructure investment.

Mutiple of GDP and Per capital GDP growth

Contribution Share of the Three Components of GDP

Contribution of the Three Components to GDP

Explain the miracle of China‘s economic growth

About the Chinese economic miracle,Past scholars have interpreted from different angles. The basic point is: opening up and economic globalization; domestic market-oriented reforms; government, especially local government's active intervention.

About the Chinese model,Past scholars to generalize from a different perspective. We tried to industrialization and urbanization development perspective to explain this miracle.

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Industrialization and Urbanization Path

Industrialization and Urbanization in a closed economy

domestic labor combined with domestic capital, have only both domestic marketsthe development in agriculture sector release labors;

the industrial demand of labor drive urbanization, and industrial products sell to domestic labor.

Industrialization paralleled with urbanization.

Industrialization and Urbanization in an open economy

domestic labor combined with foreign capital, meanwhile, have both domestic and foreign markets。the development in agriculture sector release labors;

the industrial demand of labor drive urbanization, and industrial products sell to abroad.

Industrialization did not paralleled with urbanization.

Industrialization and Urbanization Path

China‘s industrialization, urbanization and high-growth conditions

China has the largest low-cost surplus labor and other resources, so that it has a huge potential comparative advantage.

On the one hand, through LianChanChengBao system, relax hukou regulation, the rural surplus labor to be released。

On the other hand, through the opening,Foreign capital and markets to be used。

Combination above can achieve industrialization and urbanization, thus promoting economic growth。

The institution arrangement in China

Evaluation regime:Economic growth with visible “image projects”.

Fiscal regime:“eat in separated stove"; unmatched local taxing system and government function. Public service is mainly provided by local government.

The institution arrangement in China

The land regime：Urban state-owned city land can be used as construction land. Rural collective land can not be used as construction land; Governments transfer the rural collective land to urban state-owned land through land acquisition process; Government enforce to sell the land use right. Government enforce land collection; Government own monopolized selling right. Financial regime: Local governments can finance through land mortgage, and then make massive investments

Hukou regimePublic services are associated with Hukou: public service is proviovded according to citizen’s Hukou rather than living location.Unequal service level in city and rural region.

Central government’s intention

The local government is encouraged in promoting economic growth due to the current tax and evaluation arrangement.

On the condition of the current separated fiscal regime, both the central and local government prefer to collect more by serve less. The local government is unwilling to provide extra services for residents without hukou.

These systems led to the over-emphasis on economic growth as the ultimate goal of development

Central government’s intention

The local government can attract FDI through selling the industry-use land with low fee, while obtain revenue by selling business-use land with high price. prove the investment environment, thereby promoting industrialization,lands’urbanization and economic growth

City government does not provide public services for immigrated people, Limit population urbanization。

The path of industrialization,urbanization and

economic growth in China

Two ways to promoting economic growth

in the past: urbanization driven by industrialization which was motivated by economic growth. “Urbanization driven by growth for growth

The path of industrialization,urbanization and economic growth in China

Costal east region: industrialization drive urbanization. On the one hand, the low cost industry use land cost and improved infrastructure that are funds by high business land premium could attract foreign investment. On the other hand, manufacture absorbed the ample rural labor surplus with low payment. Industry products win the foreign market result from the comparative advantages of labor

The path of industrialization,urbanization and economic growth in China

Inland region: construction-lead urbanization drives economic growth. Cities without the comparative advantages purse economic growth derided from investment on infrastructure construction and real estate development.

Urbanization pattern in China

Styles of Land driven urbanization: expand old city ， exploit new city ， industrial park

Excessive Land urbanization: land has become the major resource serving for economic growth. More land are urbanized than people. Giving land for investment; selling land for economic growth, selling land for fiscal revenue.

Urbanization pattern in China

Styles of population driven urbanization: education ， migration ， urban expansion ， investment

Half people completed urbanization(35-18%=17%）Because of economic growth, one part of rural people get town hukou by accepting high education and becoming specialized skill labor They usually have high income level.

Another part of rural people obtain the town hukou by urban sprawl and expansion.

Half people partly urbanization （ 52-35%=17%）

Rural labor come to city and work in city. On one hand, the low salary can not afford high living cost in city. On the other hand, city governments are unwilling to provide necessary public services.

Urbanization pattern in China

Urbanization Rate

Urbanization population and Area

mutiple of urban population and Area growthin 1981-2011

Comparative advantage is weakening

United Nations Forecast, by 2017 or so, China 15-64 population growth rate will be from positive to negative

Labor costs are rising Remanufacturing of developed

countries Transfer to neighboring countries China Net exports are falling FDI has begun to decline

Slow economic transformation

Government investment, impede fair competition in the market, limiting private sector development

Real estate investment profits, weakening real industrial development, inhibiting investment in education and technology, impede technological innovation.

Contribution of TFP to economic growth declined Last decade

Local governments face greater liabilities and default risks

Contribution of TFP to economic growth declined

Sharp social contradictions

There are currently nearly 200 million migrant workers their important matters have been solved in full employment, children's education, medical care, social security, housing, social integration and so on.

In the land, not only develop is strictly limited by 18 million mu of arable land red line , and social conflicts around land acquisition and resettlement is very sharp.

Property-Value Bubble

Water Pollution in China

Air Pollution in China

Air Pollution in China

Conclusion

Open and large-country economy coined the characteristics of Chinese industrialization urbanization pattern, but the path is unsustainable.

Both reform and technological innovation is unsuspected. We need a new pattern. The new urbanization is people-originated instead of city’s urbanization. The aim is to improve social welfare rather happiness of people rather than economic growth.

Thank you！