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Whither China?Restarting the Reform Agenda$
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Wu Jinglian and Ma Guochuan

Print publication date: 2016

Print ISBN-13: 9780190223151

Published to Oxford Scholarship Online: May 2016

DOI: 10.1093/acprof:oso/9780190223151.001.0001

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Difficulties in Shifting the Growth Model

Difficulties in Shifting the Growth Model

Chapter:
(p.254) Dialogue 18 Difficulties in Shifting the Growth Model
Source:
Whither China?
Author(s):

Wu Jinglian

Ma Guochuan

Xiaofeng Hua

Nancy Hearst

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190223151.003.0018

In 1996, the need to deal with the negative effects of China’s extensive investment-driven growth model became urgent. To address the decline in agriculture, high unemployment, weak light industries, and backward services, a shift to an intensive growth model driven by efficiency improvements was needed. But large-scale investments remained the main driver of high GDP growth, favoring industries that consumed more resource inputs, generated high environmental losses, created fewer jobs, and had low value-added. Suppression of the services sector contributed to unemployment. Excessive investment led to increased non-performing loans and an accumulation of risks in the financial sector. Although since 1996 the Chinese government has emphasized changing the economic growth model, institutional obstacles have been escalating. To eliminate the obstacles and transform the growth model, it is necessary to establish a market system, backed by the rule of law, which will be conducive to innovation and entrepreneurship.

Keywords:   Chapter intensive growth model, excessive investments, GDP growth, efficiency improvements, entrepreneurship, innovation

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