A Study On Industrial Upgrading And Economic Growth Theory

Since the reform and opening up, Chinese economy develops fast. China, ever a poor andbackward undeveloped country, becomes a preliminary industrialized socialist country. But atpresent, the comparative advantage of labor force, on which China’s labor-intensive industrialdevelopment relies, has a weakening trend. Capital intensive industry development is affected byenvironmental constraints. To upgrade industry becomes a must if China wants to maintain the highgrowth continuously.From the western mainstream economic growth theory, this paper puts the economic growth andindustrial upgrading theory together in a framework and set up a merging model by usingcomparative static analysis and dynamic analysis. By using the model, the author analyzes the fusedway of China and o industry upgrade and economic growth.This paper first reviews and comments the theory of economic growth, and summarizes thetheory of industrial upgrading, on the basic of which the theory of industrial upgrading and thetheory of economic growth is converged, the merging model between industrial upgrading andeconomic growth is set up. By doing so, the author analyzes the path of the industrial upgradingand economic growth in developing countries.In the further analysis of the short-term path, according to theories of the Western short-termequilibrium and industrialization the author thinks that the short-term path of developingcountries should be using a expansionary aggregate demand policy to stimulate the aggregatesupply, absorb the surplus rural labor force and promote the process of industrialization andeconomic growth.When further analyzing the mid-term path, the author studies the reason of economic fluctuationstarting from the economic cell, commodity, and draws the conclusion that the production scale ofthe first category which supports the production and development of the second category isflexible. If the social production of the first category is in large scale, and the growth of the secondcategory is unable to absorb the production capacity of the first category. The internal circulationscale of production of the first category which is mot used bye the second category will lose usevalue, therefore loses its value. Following it, the entity economic bubbles appear.If economy meatsinternal or external shocks, the economic bubbles will collages, which will result in recession andcrisis. In order to avoid the real economy bubble, the industries should be develop proportionally.Due to the lack of funds and other reasons, the industries in developing countries can’t develop gradually, continuously and proportionally like in developed countries. the mid-term path ofdeveloping countries should be based on their own national conditions and economic stages, shouldbe in line with the rules of industrial upgrading to determine the target of the industrial upgrading,The developing countries should undertake international industrial transfer according to the target,by investing in new equipment, new technology introduction and imitation. The developingcountries should develop the first category according to the target of the industrial structureupgrading, and then follow the second category.The developing countries should promote the nextupgrading after completed an upgrading of the industrial structure.They should not pursue thedeveloping of the first category blindly. By doing so, the developing countries can avoid economicfluctuation and achieve the upgrading of the industrial structure and the proportional andcoordinated development in the long-term.In the further analysis of the long-term path, the author believes that developing countries,which develop to a certain extent, will not be able to buy and introduce advanced technology andequipment from developed countries and undertake the international industrial transfer to achievetechnological progress, the long-term path of economic growth in developing countries can only beindependent innovation.Technological innovation is the basic driving force of industrial upgrading and economicgrowth,This paper analyzes technological innovation using classical demand and supply theory ineconomics. The demand for technology innovation originates from consumption. The demand forinnovation of consumption goods comes directly from the demand for consumption. The demandfor innovation of capital goods steams from the fact that it can reduce production cost and promotethe consumption. Income level affects the demand for consumption and further influencestechnological innovation. The supply of the technical innovation mainly comes from enterprises.Enterprises will make decisions in accordance with their tradition. system affects their traditionThe long-term path of the developing countries is to improve the income and consumption level ofthe residents, and to formulate and implement a good system, in order to promote independentinnovation.A good system is the security of industrial upgrading and economic growth. This paper analyzesthe function of system to investment, industrial upgrading and technological innovation. The authorthinks that compared with planned economy, market economy is more benefit to investment,undertaking the international industrial transfer and realize industrial upgrading, and is moreconducive to the achievement of competition, to the promotion of technological innovation and thesustainable, rapid and healthy growth of the national economy. Good property rights system, themacro-control in the right direction and the national technology innovation system composed of government, scientific research institutions, universities and enterprises can promote thedevelopment of a country’s industrial upgrading and sustainable economic growth.Based on the theoretical analysis of industrial upgrading and economic growth, this paperreviews the process of industrial upgrading and economic growth since the founding of new China.The author analyzes the opportunities and challenges faced by China currently using econometricsand the establishment of a mathematical model. This paper proposed the merging path for China toachieve industrial upgrading and economic growth using the conclusion drawn from the theory ofthis paper.