Interest Derivation And Economic Growth In China's Economic System Reform

Fast economic growth in China since the reform and opening up is remarkable,but the traditional growth pattern which is driven by investment and focuses on quantity of economic growth is hard to maintain.In the 'new normal',to accelerate the transition of economic growth pattern and to further the reform is a necessary requirement of sustainable development.Meanwhile,there are still insufficient and unbalanced problems in China's economic development,which indicates that there may exist interest distortion and imbalance in China's growth sharing mechanism.Transition of growth pattern will bound to interests adjustment,therefore the interest relationship evolution will be a good perspective to analyze the economic growth.The transformational growth of China is essentially a kind of investment-driven growth,which is primarily government-dominated.The prominent characteristics of this growth pattern is the combination of state-owned enterprise behavior and local government behavior,hence the government factor has to be considered when we analyze economic growth problem.However,merely considering government behavior is not enough,because the government behaviors need carriers to take effect,which are exactly state-owned enterprises and state-owned banks.In the past four decades of reform and opening up,under the bond of state-owned property rights,local governments,state-owned enterprises and state-owned banks have maintained close ties in their behaviors and interests.So how does this deepening interest derivative relationship affect China's economic growth?This is an important clue of this paper.This paper intends to study the relationship between reform and growth in China from this aspect and provide some suggestions for further deepening reform in China.This paper builds a theoretical model to illustrate the evolution process of interest derivation based on recessive institution,and constructs an index system basing on its internal logic and performance characteristics to measure the degree of interest derivation by using panel data of 29 provinces during 1988-2015.The result shows that,the overall degree of interest derivation is deepening,its negative impact on economy is getting more serious,and this impact presents remarkable regional effect.Compared with the eastern region,its negative influence is stronger in Midwest because of its faster interest deriving speed.Meanwhile,the study finds that the interest derivation has two sides to economic growth,showing a significant threshold effect.When the capital stock is low,the interactive behaviors of local governments,state-owned enterprises and state-owned banks will not show negative impact on economic growth.However,with the continuous increase of capital stock,the interest derivation will gradually show a negative impact on economic growth.Also,this paper builds a model to measure the degree of resources misallocation caused by the differences of ownership.Using this model,we analyze factor price distortions between different ownership.We find that the output loss is getting worse with the deepening interest derivative relationship.Meanwhile,the distortions of capital prices in non-state-owned sectors and those in state-owned sectors show differentiation.Under the influence of interest derivation,the problem of growth quality gradually appears with the rapid economic growth.The research shows that the influence of interest derivation on growth quality presents stage characteristics and regional characteristics.The influence is weak in the high-quality growth period,while the influence is strong in the low-quality growth period.On average,the negative impact of interest derivation on the growth quality is more significant in the Midwest.In conclusion,the interest derivation between local governments,state-owned enterprises and state-owned banks is essentially a kind of derivative relationships between government and market.The behavior of interest derivation itself is neutral,and it plays different roles in different stages of reform and development.In the 'new normal',resolving the interest derivation is the core to ensure steady growth,and the specific approach lies in rectifying behavior of local governments,state-owned enterprises and state-owned banks.However,the realization of behavior rectifying will ultimately fall on the further deepening of reform and separating government functions from enterprise management.Therefore,China needs to accelerate the transformation from incremental reform to stock reform,further straighten out the relationship between the government and the market,and highlight the decisive role of the market.Through deepening property rights reform,transforming government functions,and building an open and orderly competitive market to rectify the behavior of local governments,state-owned enterprises,and state-owned banks.Through deepening the institutional reform to compress all kinds of rent-seeking space,ultimately achieve the goal of improving the efficiency of growth.