Research On China’s City Economic Growth Factors Basing On Structural Equation Model

Since the implementation of the reform and opening policy, with China’s rapid economic growth, China’s influence in the world economy and international affairs has expanded rapidly. Rapid economic growth has provided the necessary guarantee for the realization of the Chinese nation’s peaceful rise and national rejuvenation. From 1979 to 2012, the average growth rate of China’s economy reached 9.8%, while the average annual growth rate of the world economy was only 2.8%. Statistically speaking, China’s economy has outshined other countries world widely, which highlights the strengthening economic growth momentum of China. However, since 2012, China’s economic growth has been slowing down to less than 8%. In 2015, China’s GDP growth rate has been set at 7%, meaning that China is undergoing an economic shift from a rapid growing stage to a new normally growing stage. In order to explain the reason of strong economic growth momentum in the past 20 years in China, as well as how to release more space for economic growth in the new normally growing time, this paper mainly analyzes why China has achieved rapid economic growth and gives out corresponding policy recommendations, basing at the data of cities at and above prefecture level in China.Using a Structure Equation Model (SEM), this paper concentrates on the reason of China’s rapid economic growth by analyzing the data of cities at and above prefecture level of the year of 1994,2004 and 2013. I choose these following suitable index to measure how material capital, human capital, technology level, transportation facilities and policy factors contribute to the city’s GDP. All these data comes from urban statistical yearbook and provincial statistical yearbook. In this paper, I firstly make an overall research basing on the data of all cities at and above prefecture level, and then grouping these cities by measuring their level of GDP. Cities which rank the top 100 are called High GDP group, while other cities are call Low GDP group. This can not only study vertically how each factor contributes to GDP differently, but also compare sideways how each factor contributes to GDP during different economic level.The study indicates that material capital contributes most to the rapid urban economic growth in our country, while other factors contribute less than material capital despite their positive effect. What’s more, when city GDP reaches a certain level, material capital does not contribute most to the urban economic growth but technology and institutional factors paly the most important role in the economic growth of cities. This research also finds that the growth factors of high GDP and low GDP groups are different. For the moment, technology level and political factors are the most important growth factors in urban economic growth for high GDP group while material capital still contributes most for the low GDP group.Basing on these findings, this paper puts forward the corresponding political suggestions of how to release more economic growth space.