CHINA'S ECONOMIC GROWTH

China's Economic Growth

China's Economic Growth

Q: Could China's rapid economic growth be considered a good thing for the west?

Introduction

China has transformed into a global trade power. In 2005, China was the third-largest trading nation in the world (after the United States and Germany), and its trade is growing far more rapidly than that of any other large economy. China has now achieved a degree of openness that is exceptional for a large, continental economy (Naughton, 2006).

In 2005 China's total goods trade (exports plus imports) amounted to 64 percent of GDP, far more than other large, continental economies—such as the United States, Japan, India, and Brazil—which have trade/GDP ratios around 20 percent, the highest being Brazil's 25 percent (Wu, 2007). Trade liberalization has been an integral part of China's economic reform process since its beginning.

The most recent phase of trade policy reform began with China's formal entry into the World Trade Organization (WTO), on December 11, 2001, which started the clock running on a series of liberalization commitments kicking in between 2001 and 2007. Besides marking a new phase of policy reform, WTO membership symbolizes China's coming of age as a participant in the global economic community (Hofer, 2006).

China's Economic Growth: A Political Perspective

Most economic sociologists proceed inductively, looking at how economic behavior varies over time or across countries and tracing that variation to something about social context. This is quite different from the approach of most neoclassical economists, who proceed deductively from the premise that individual self-interest explains economic behavior. Studies of investment among early Protestants, management of new enterprises in China's market-oriented sector, and business strategy among Argentine wine producers have produced myriad insights about the forces that shape economic behavior. But sociologists have usually found that one of three different social processes is at the heart of the matter, and these processes have been spelled out in power, institutional, and network theories (Naughton, 2006).

Postwar politicians pursued strategies of legitimation that built on certain aspects of traditional authority structures. Postwar state-industry relations arose by design, but history provided the alternatives from which designers chose. Japan has powerful intermarket industry groups under a state that helps them plan and coordinate. After the American occupying regime dissolved the prewar zaibatsu, politicians built directly on the Tokugawa and Meiji authority system, in which the shogun or emperor was “above politics” and provided a weak center surrounded by strong but loyal independent powers. The postwar Taiwanese and South Korean states built on two different legitimating aspects of the Confucian political system. When Korea was embroiled in a civil war, the state directed industrial growth and presidential cronies became leaders of huge empires. The Rhee and Park regimes drew on the imagery of the strong, centralized Confucian state, with weak intermediate groups. The result was large family-dominated business groups beholden to the state (Naughton, 2006).

The resulting system mirrored late imperial China, with small family-run firms that had direct contacts with suppliers and buyers. In each case, politicians who were determined to ...