'China's Remarkable Economic Growth'

The book is a culmination of a major research project funded by the Leverhulme Trust to explore China's economic success. No other major country has grown so fast - by some ten per cent a year - for no less than three decades. The Oxford University researchers explore the consequences of this remarkable economic phenomenon and its social transformation in China.

The average personal income in China has risen by five per cent a year since the mid 1990s. Yet according to Professor John Knight, Emeritus Professor of Economics and former Oxford research fellow Dr Sai Ding, this recent wealth does not equate with personal happiness. In their new book, China’s Remarkable Economic Growth, they find that the happiness of the Chinese people has not risen as expected. When people were asked to rate their happiness or satisfaction with life, the average happiness score was found to have fallen over time.

Books asked Professor John Knight about his research:

According to your research, which section of the Chinese population is now the unhappiest?

The unhappiest group in Chinese society are the rural-born workers who have migrated to the cities and towns. People still living in rural areas are found to have the highest happiness scores. Despite their much higher incomes, urban-born people are less happy than rural people. We attribute this  to the loss of their “iron rice bowls” – the security that  the state-owned enterprises had provided before they were reformed or privatised - and their aspirations to “keep up with the Zhous” in the new market economy. The rural-urban migrants - there are now 150 million of them - have commonly raised their incomes by migrating but their aspirations have risen even faster as they become part of urban society.

You say in the book that China should qualify as being described as a ‘developmental state’. What is this status and why have you attributed it to China?

We argue that the policies pursued by the Chinese Communist Party since the late 1970s qualify China as a ‘developmental state’, in which the overriding policy priority is economic growth. China became a developmental state when the leadership under Deng Xiaoping introduced economic reform in order to restore and maintain political legitimacy. The drive to create a market economy succeeded because one reform led to another in a cumulative process. New institutions provided the right incentive structures, a prime example being that appointments at many levels rewarded success in promoting economic growth. A policy of fiscal decentralisation gave growth incentives to all tiers of government. Entrepreneurs gained confidence from these policies, leading to what the authors say was, by international standards, a ‘remarkably high’ level of both investment and saving.

Is economic growth all good news for China or has it created new problems?

Income inequality – initially too low to provide the incentives needed in a market economy – has risen to become the highest in Asia. China’s environmental problems have escalated, and corruption is a source of concern for the leadership. China’s system of governance provides little voice for its people and little political accountability. There is also the risk of an adverse shock, such as a financial crash associated with China’s macroeconomic imbalances or social unrest. Because of these rising tensions the Chinese government has recently introduced policies to promote a ‘Harmonious Society’. 

Is China’s economy likely to continue to grow at its current rate?

No, the growth rate is likely to slow down somewhat in the future. There is less scope for the rapid structural change that has fuelled growth up to now. The one-child family policy of the reform period means that the labour force is beginning to decline, and the hitherto abundant supply of migrants from  the countryside is drying up. This will require a change in development strategy away from the currently successful one of producing labour intensive exports.

What can other developing economies learn from China?

The Chinese economy is too different to permit simple copying. The most important lesson that it offers other countries lies in the answer they can find to the question: Can they create a developmental state while avoiding the disadvantages that have accompanied it in the Chinese case?

China’s Remarkable Economic Growth is published by Oxford University Press.