Institutional Factors Of Economic Growth In China :1978-2004

Since the economic reforms and open-door policies began in 1978,China has become the fastest growing economy in the world. The average annual growth rate of GDP in the past decades was 9.4%. What are the sources of China's economic growth? In the past, the research mainly focused on three variables—Capital, Labor, Technology. However, since further research was occurred, economists suggest that only focusing on the three factors is not enough.We suggest that the process of China's reform should be a process of institutional change, and it was the institutional change that has propelled the China's economic growth so steady and so fast. In my paper, the whole institutional change in China is represented by the ownership institutional change, and we try to endogenize the institutional factor to build a new economic growth model. At last we discuss the institutional change's contributions to the China's economic growth. In the regression results, we find that, from 1978 to 2004, the institutional factor has played a great role in China's economic growth and the China's economic cycle in the period was to some extent institutional. The result is meaningful to the Chinese government.My paper is divided into three parts. In Chapter 1, we give a survey about the growth theory, and focus on the New Institutional Economics. In Chapter 2, we endogenize the institutional factor to build a growth model, and discuss how institutional factor can influence China's economic growth. In Chapter 3, we evaluate China's reform and open door policies, and make some suggestions on China's institutional reform in future.