Determinants of economic growth in China: 1978-2013

On 1 October 1949, the Communist Party of China under the leadership of Mao Zedong proclaimed the establishment of the People’s Republic of China. Mao was to lead the People’s Republic of China for the next twenty seven years until his death in 1976. During this twenty seven year period under Mao’s leadership the Communist Party of China consolidated its position as the leader of Chinese society and in so doing consolidated communist ideology as the central perspective that guided social and economic planning in China. In 1978, two years after Mao’s death, Deng Xiaping assumed the leadership of the Communist Party of China and this period marked the beginning of far reaching economic and social reforms in China. Over the next thirty years these reforms were to transform China’s economy from the tenth largest to the second largest in the world by the end of 2013. During this period China grew its manufacturing base to the extent that the country has become the world’s largest manufacturer and the world’s leading exporter. This transformation of China’s economy has translated to the country experiencing a period of high levels of economic growth over a sustained period of over 30 years. Estimates suggest that the country’s gross domestic product grew at an average annual rate of nearly 10% over a thirty year period from 1978. These high levels of economic growth have significantly contributed to the overall reduction of poverty levels in the country, with some estimates suggesting that between 300 million to 500 million of the country’s citizens have been lifted out of poverty over a period of thirty years. China’s economic growth has had an impact beyond its own borders, as growth in many developing countries has been inextricably linked to developments in the Chinese economy in particular its demand for raw materials.For developing countries that continue to grapple with high levels of poverty among its citizens, China’s experience of lifting such large numbers of its own citizens out of poverty at the back of high levels of economic growth over a period of thirty years must serve as a basis for some learnings. The primary purpose of this research is aimed at contributing towards building the basis for such learnings, particularly with regards to building an understanding of how China has been able to grow its economy at such high levels over a sustained period of time. This research aims to identify the determinants of China’s growth post 1978. The determinants of growth are studied particularly from 1978 because the year marks the beginning of the period of economic reforms