China’s GDP Growth Decomposition: 1952-2005. Economic

Name
Instructor
Course
Date
China’s GDP Growth Decomposition: 1952-2005
Table 1
Period

GDP growth

Fixed Capital

Labor

Human capital

TFP

1955-1965

3.80%

5.20%

1.40%

2.00%

0.40%

1966-1976

4.20%

7.50%

2.40%

3.10%

-0.80%

1978-1990

8.90%

8.30%

3.00%

3.90%

3.20%

1991-1999

10.60%

10.40%

1.10%

1.70%

5.10%

2000-2005

9.50%

12.60%

1.00%

1.80%

3.10%

GDP growth driven by capital stock, labor, human capital and TFP

Contribution to Measured GDP Growth from


Period

Fixed Capital

Labor

Human capital

TFP

1952-1978

54.0922

0.00%

31.0379

14.8700

1952-1957

12.7809

0.00%

14.8433

72.3758

1957-1978

69.3933

0.00%

37.0361

-6.4294

1978-2005

43.6934

0.00%

16.2027

40.1039

1978-1995

37.5241

0.00%

19.2734

43.2025

1995-2005

55.0142

0.00%

10.5678

34.4180

Contribution to Measured GDP Growth from capital stock, labor, human capital and TFP

Contribution to Measured GDP Growth from


Period

Fixed Capital

Labor

Human capital

TFP

1955-1965

59.7649

0.00%

30.8775

9.3576

1966-1976

77.0830

0.00%

41.5284

-18.6114

1978-1990

39.8138

0.00%

24.6520

35.5342

1991-1999

42.4481

0.00%

9.3248

48.2271

2000-2005

57.1022

0.00%

10.6205

32.2773

In the period 1955-1965, there was a 3.80% growth rate, and the growth increased at a higher rate from then on. During the Maoist regime (1948-1976), China was mainly underdeveloped and the agriculture-based economy grew gradually, but still there was low economic development. The Chinese Communist leader Mao Zedong focused on a socialist economic and political structure eliminated the role of private businesses in the economy and private property. The evolution of Chinese economic growth is closely linked to the political and economic institutions that have been either been open to the world or isolationist. There was emphasis on public ownership as a means of production to transform the agricultural sector and industry
The Great Leap Forward from 1958 and 1962, which was also the second five-year plan, was meant to preserve Chinese Communism and remove all traces of capitalism in the country. However, the economic reforms to make China a communist system rather than a socialist system were a failure, as the policies were ineffective in leveraging the high labor abundance to grow the economy and there was famine. There was readjustment in 11963-1965 where there was focus on strengthening the weak economic links and meeting the consumers demand and not merely to increase the gross output.
In the period 1966 to 1976, the economy grew by 4.20%, but still the country was poor, while in much of the 19th century up to 1949 GDP remained was virtually stagnant. The Cultural Revolution from 1966 to 1976 further challenged capitalist elements in the Chinese society and the Chinese traditional way of life, and many Chinese leaders were purged from the communist power. However, the period laid a foundation for post-1978 development, since there was more focus on improving the standards of living and move away from the economic disaster of the Great Leap Forward period. In 1959 to 1978, economic growth was mostly linked to the accumulation of capital, while which was the largest contributor to growth, but since 1978 increase in productivity had more influence on the economic growth.
In the period 1978-1990 the average GDP growth was 8.90% and since 1978, there has 40 years of sustained economic growth since 1978 when reforms were adopted. The reforms initiated in 1978 included the decollectivization of agriculture, the opening of China to foreign investors and allowing private businesses to operate (Xu 291). Furthermore, the denationalization of services, the end of the Cold War and the rise of international trade allowed the country to begin to register more rapid growth compared to Mao regime, even as the planned economy had significantly increased the technical capabilities in the 80s. The reforms further facilitated the opening up of the Chinese markets in the late 90s and growing exports.
The acceleration of the economic growth in China after 1978 occurred at a time of slowing population growth rate per capita, which resulted in the GDP per capita increasing at a higher rate than the previous decades. Since 1978, the average GDP growth in China has been above 6%, the longest period in any countries that have had such high growth rates. In the period 1984-1985 the growth rate first peaked above 12%, at a time when there were rural reforms and the economy had been readjusted. Furthermore, Deng Xiaoping the Chinese paramount leader relaxed controls over the agricultural sector, which allowed the emergence of small-scale industries. Devaluation of the Chinese Yuan combined with huge rates of investment, savings and cheap exports still influence the Chinese economic model.
The average GDP growth rate in 1990-2000 was 10.60% and there was inc...