Beijing: Higher Education Press, 2014. 520 pp. ¥89.00, paper. ISBN 978-7-04-039235-7.
The take-off of the Chinese economy beginning at the end of the twentieth century surprised many experts within China and without. It also represents the most serious challenge to the geo-economic order in the Pacific region and beyond since the mid-nineteenth century. Unprecedented in world history in terms of scope and speed, China’s economic transformation from an impoverished country to the world’s second largest economy in a short period of time also challenges the existing theoretical paradigms. As Hong Yinxing points out in the introduction to his The China Path to Economic Transition and Development, old theories about economic development and transition can no longer sufficiently explain the recent changes in China’s economy. Nor could these theories provide guidance for its future growth.
Hong divides his book into two parts. In part 1 (the first six chapters) of the book, he provides the theoretical basis for understanding the “China model” of economic reform and opening. In chapter 1, he notes that China’s pattern of economic development is different from the models prescribed by Western theories of economic transition. In other words, what characterizes China’s transition is its focus on marketization, rather than privatization. He also notes that in conducting its market reform, China sets itself apart from countries like the former Soviet Union, whose goal was to transform itself into a capitalist economy. By comparison, China’s goal is more gradual and more focused on social stability. In chapter 2, he points out that this pattern of development remains socialist in essence and is uniquely Chinese. Hong argues that China’s economic success in the past three decades convincingly shows that the “China model” is a successful one. In chapter 3, he analyzes the deliberate efforts that China made to revamp its economy gradually. Those efforts include non-state elements in the economy and reforming the ownership structure of state-owned enterprises. In the next chapter, Hong discusses the steps that China took in establishing a new market-economy order. He demonstrates the complexities of the creation of this new order by noting that it cannot take place simultaneously with the destruction of the old planned economy system. In chapter 5 he looks into non-economic sectors such as public transportation, education, and public health, confronting issues like social security, unemployment, and social justice that became more prominent as the economy grew. In the last chapter of the first part of the book, the author reminds us that the two driving forces of the Chinese economy, namely FDI (foreign direct investment) and labour, can no longer give China the competitive advantage that it needs to sustain and continue its economic growth.
In the second part (the last eight chapters) of the book, Hong explores the “China path” to economic development. China’s rapid economic growth, he notes in chapter 7, is seldom seen in the world. It became the second-largest economy in the world in 2010, the largest country in terms of foreign currency reserves, and the second-largest import country. Now China needs to find a “new driving force” and reorient its economic development. This is because old factors that supported China’s economic take-off are losing steam. For instance, labour is becoming increasingly expensive and scarce. China can no longer rely on investments and exports to sustain its economic development; rather, it must expand domestic consumption and technological and scientific innovation. In other words, China must shift from extensive economic growth to intensive growth, which is the subject of chapter 8. The latter, as Hong notes in chapter 9, will lead to a “new economy,” which is based on knowledge, information, the Internet, and digitization. In chapter 10, he explores how China can develop innovation as a way to sustain its economic development. Chapter 11 examines another challenge that the Chinese economy faces: how to obliterate the urban-rural divide, which has become worse in recent decades. The solution, he argues in chapter 12, is the modernization of agriculture, which requires, among other things, the introduction of science and technology to agricultural production. Chapter 13 explores how to use expanded consumption to stimulate economic growth. The last chapter of the book returns to a topic he touched upon earlier: why China’s economic pattern is uniquely Chinese. To answer this question, the author looks at the economic ideas and policies of the Chinese Communist Party.
This is an extremely thoughtful and well-researched book, which demonstrates the author’s profound familiarity not only with the modern theories of economic development and transition but also with China’s recent economic growth. The book is coherently organized around two fundamental and inter-related questions: whether China’s rapid economic take-off in recent decades represents a pattern that is uniquely Chinese and whether China could sustain its growth in the future. He tackles these questions by looking at different aspects of the rapidly expanding Chinese economy and the subsequent socioeconomic issues that accompany China’s economic expansion. His convincing argument that China’s development challenges existing theories of economic development and transition embodies a theoretical innovation. Through his extensive data and nuanced analysis, Hong provides valuable insights into the past, present, and future of the Chinese economy, which will benefit economists, policy makers, and researchers and students of the Chinese economy. These insights are now made accessible to English readers as well thanks to the faithful and effective translation by Professor Xiao-huang Yin.
Yong Chen
University of California, Irvine, USA
pp. 688-690