Industrial Transfer, Upgrading, Integration And China's Economy

Under the circumstances of globalization, industrialization and urbanization, the present paper investigates several topics of China's economy in the light of endogenous economic growth theory, which includes the high-speed economic growth after the reform, current-account imbalance, and industry upgrade and integration.The most important impetus of China's economic growth includes industry transfer and labor force mobility. After the reform and opening up of China, many industries especially manufacturing transfer from advanced countries to China. At the same time, more and more rural labor force moves into the cities and enter non-agricultural industries. In this process, China's comparative advantage has been fully displayed. During the two-way transfer, China is confronted with severe current account imbalance because of structural problems, which include poor technology innovation capability, low efficiency of financial market, and investment barriers. According to the endogenous technology R&D model, the present paper constructs a formal analytical framework to investigate the mechanism of these issues. This paper rationalizes current account imbalance as an equilibrium outcome when different regions of the world differ in their economic structure.Industry upgrade is in fact technology upgrade. The present paper analyzes the mechanism of slow technology upgrade taking the Zhujiang delta as an example. The key reason is the complementation between technology adoption and human capital investment. This will lead to multi-equilibrium in some circumstances. One is the high-technology equilibrium, which refers to high-speed technology upgrade and high-level human capital; the other is the low-technology equilibrium, which refers to low-speed technology upgrade and low-level human capital. The present paper constructs a formal analytical framework to investigate this mechanism on the basis of human capital model and learning by doing model. China has been in the low-end of global industrial division chain since the reform and opening up, which is an equilibrium outcome of China's factor endowment. To promote industry upgrade, the government had better subsidize technology innovation and human capital investment. Because the externality of human capital investment is larger, the government should focus financial support on human capital accumulation.Industry integration is an important aspect of metropolitan area's optimization and upgrading of industrial structure. The principle of industry integration is to exploit comparative advantage of all the cities, and the pivot is the mode of industry integration between the central city and the other cities. There are two paths of industry integration between the central city and the other cities, respectively are sector specialization and function specialization. From the experiences of developed countries, along the advancement of communication technology, there has been a shift in the main dimension along which cities specialize, from a specialization by sector to a specialization by function. In fact, the Yangzi delta has also shown this transformation. The current paper investigates the mechanism behind this phenomenon in the light of endogenous technology innovation.