Convergence Of China's Economic Growth And The Path Conversion

Under the assumption that the marginal product of capital decreased, neoclassical economic growth model demonstrated a conclusion that economic growth would eventually become stable state in a closed economy. In this stable state, per capita output remained unchanged; the rate of economic growth was zero. Nowadays, the process of the economy tending to its stable state is called economic growth convergence. If the economic growth is convergent, the backward economy due to a higher growth rate of marginal product could be growing faster than the developed economies. The backward economy will converge to the developed economies until they reach their own stable state. Convergence hypothesis of economic growth has been tested empirically in the world of different countries and regions, but the conclusions are different because the reality is complex and diverse. However, while studying the existence of economic convergence, the causes of regional economic differences and the corresponding policy implications derived from the empirical analysis are attracting more and more economists to make more extensive and detailed research.As a large developing country, the reform and opening up of China has greatly stimulated the regional economic development. While elevating the level of the national economic development, the differences of the regional economic among East, Middle and west also have been increased, and government and academia have begun to attract much attention to the coordinated development of regional economic. It has become research focus that the use of theory about economic growth convergence to examine the existence of Chinese economic growth convergence and the reasons of the regional economic differences. Based on reviewing the neoclassical growth theory about convergence of economic growth, This paper discussed the convergence of regional economic growth in China and the economic growth path under the impact of export in the view of empirical analysis:(1) Using the sigma convergence tests, conditional beta convergence test and club convergence test studied the economic growth convergence, convergence rate and internal causes in different time periods and regions from 1978 to 2008. (2)Using the panel data mode, the factors of economic growth convergence in China were discussed, and then it was analyzed in detail that the investment and exports impact on the China's economic growth convergence. (3)Based on studying that the investment and exports impact on the economic growth convergence and combined with the impulse response function and variance decomposition method, we further explored the relationship between the structure change of these two factors and path conversion of the economic growth. The results show that:in different time periods and regions, the economic growth convergence and convergence rate were different. To the terms of provinces, there was convergence from the 1978 to 1991 and from 2000 to 2008; the convergence rate was 0.73% and 1.22%. But there was no convergence from 1992 to 1999. The results of Club Convergence test showed that there was club convergence at the beginning of the reform and opening up, from 1978 to 1991. On the other hand, investment and exports affected the economic growth convergence of whole provinces from 1978 to 2008, and central and western provinces from 1992 to 1999. So we could say that the tendency of convergence or divergence was caused by investment and exports. But investment and exports couldn't affect the economic growth convergence of the eastern provinces and three regions from 1978 to 2008, central and western provinces from 1978 to 1991 and from 2000 to 2008. Finally, using the impulse response function and variance decomposition, it could be seen that the external shocks of investment and export would bring the same impact to the level of China's economic growth. When the exports got a negative impact, the average economic growth of provinces would be restrained. Furthermore, this repression would last in a long time. However, in some extent, increase investment could be reduced the negative effects of the economic growth due to export restricted.