Institutional Factors Of Economic Growth In China

Economic growth is an important theoretical problem as the key point of macro-economics, and it's also a significant practical problem as the practical need that one country advances and increases its peoples' fortune. Economists and crowd are facing one question: why some countries become more and more rich, while some are in opposition. Namely, which factor determines the economic growth of one country? To explore the mystery of economic growth, economists gave some kinds of answers to this question from different points of view. Since the reform and opening up, the high-speed growth of Chinese economy has attracted the whole world and created a miracle of Chinese economy. More and more specialists and scholars are becoming interested in Chinese economy growth and attempting to uncover what made Chinese economy grow so fast. Literatures available mainly analyzed the attribution that product factors like labor, capital, technology, etc, have done to the economy growth. Some also became to pay attention to the problems of region structure and development during the economy growth. However, the problems of economy growth were not well and firmly connected to our country's special institutional reforms. In other words, the present studies on Chinese economy growth mainly focused on the direct factors that promoted the growth, such as supply of product factors, technical innovation, economical structure and efficient need, but ignored the fundamental reasons of our country's economy growth. The new institutional economics showed that institutional reform is the fundamental drive of economy growth. Thus, the present dissertation tries to discuss the correlation between the institutional reform and economy growth, the institutional defect and institutional choice, based on Chinese the fact of institutional reform since the beginning of reform and opening up.By means of analyzing the inherent relationship between institutional reform and economy growth, studies of the present dissertation show that the perspectives of factor of production, technical innovation, effective need and economic structure are the four most important drives of economy growth. And these drives are derived from institutional reform. Institutional reform can result in the change of prompting structure, release the creativity and activity of economy main body, optimize the resource allocation and stimulate technical innovation. Meanwhile, institutional reform can produce the change of relative price, promote the adjustment of economy structure. Institutional reform also changes peoples' anticipative efficiency and consumption pattern, stimulates the efficient need, and further promotes the economy growth. As the new institutional economic historian believe, among whom North is the most representative, technical improvement and product capacity development which are used to illustrate the economy growth, are in fact the economy growth itself rather than the cause of economy growth. The institutional reform is the true cause of economy growth.China's remarkable growth performance over the last three decades is widely attributed to its unique development model. A principal element of this model has been an incremental and experimental approach to reforms, with the reform process being guided by some general principles rather than a detailed blueprint. Since the beginning of the reform and opening up, China has realized its institutions reform in a series of important fields, such as the price system, state-owned enterprises, taxation system and foreign trade policy .The strategy to keep the balance among the reform steps, economic growth and social stability is a wise way to reduce the turbulence and facilitate the rapid sustainable growth in the transitional period. However, lots of the original institutional defects have not been thoroughly eradicated and, with the continuous deepening of reform, these defects caused increasingly negative effects in various socio-economic fields. A range of issues, like income polarization, dual structure in urban and rural areas, government transformation, require the breakthrough at the institutional level. Therefore, the next three chapters focus on the reality of China.Chapter 5 studies the institutional defects in China and tries to expose the contradictions in the existing constitutions and their performance in depth. The content of this whole chapter specifically includes economic growth pattern (including the government intervention and economic operation efficiency), effective demand (including consumption, investment and export), factors of production (including natural resources, human resources, capital), technological innovation and economic structure (including regional, Urban-Rural and industrial structure). We will illuminate the unreasonable existence constitutions, analyze their history, operational mechanism and negative effects, and clarify the evolutional direction.Chapter 6 correspondingly provides some viable suggestions on the institutional arrangements to achieve the long-term growth of China's economy institutional arrangements. The content is structured as follows: In Section I, this paper focuses on the institution choice of the economic growth pattern and studies the two significant macro proposition: constrain of excessive government intervention and promotion of economic operation efficiency; Form Section II to V, this paper tries to outline the feasible institution architecture at the middle lever respectively from the perspectives of factor of production, effective demand, economic structure and technical innovation. This paper believes that only the institution innovation in all areas and continuous adjustment to stimulate and regulate all economic subjects could supply the unexhausted impetus for the sustainable economic development.The Chinese government plays a strong role in social activities and leads the constitutional change, but it has its own economic interests as well and demands external force to promote, standardize the implementation of the internal reform. Meanwhile, the tide of economic globalization rolls forward and has become the topic that all countries must confront. Chapter 7 begins with a review of the evolution, results and correspondent institutional change of the China's opening-up policy, then makes forward-looking analysis on the institutional change the globalization requires in future, involving the government management mechanism, financial system, industrial system, the labor system and the interests- coordination mechanism. It is concluded that the government must promote the sensitivity, consciousness and creativity to drive the institutional change by the external stimulation, to gain the victory in competitive contest in the era of globalization.The institutional changes involve the various socio-economic fields. However, this paper holds the opinion that all the changes have the same fundamental object, promoting the socialist market economic system. Individuals and organizations should participate in the economic activities in accordance with market economy rules, while the administrative power only is a complementary means to allocate the resources. Only the transformation from the administrative institutions to independent market participants as the subjects, from the executive power to fair competition as the operational mechanism realize the fundamental revolutions on economic and social relations, reaching the social welfare maximization by conscious activities of all parties under the framework of the established institution. In this process, we believe, it is particularly important that the government, as the institution supplier, take the initiative to transform its functions to truly be the watchdog rather than the directive participants.