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Frontiers of Economics in China

Front Econ Chin    2011, Vol. 6 Issue (2) : 327-344
China’s Growth Model and Structural Unbalance in the Open Economy
Wenpu Li(), Min Gong()
Center for Macroeconomic Research, Xiamen University, Xiamen 361005, China
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The Chinese economy has been significantly affected by the global financial crisis. Moreover, a rapid decline in growth rate can be mainly attributed to the expenditure structural unbalance, which takes root in its uneven national income distribution. Furthermore, the uneven national income distribution is the result of the extensive pattern of China’s economic growth in the open economy. The extensive pattern is characterized by labor-intensive export-led growth model. The need for high growth rate and fiscal revenue maximization forces local governments to compete against each other to get FDI by undervaluing production factors, resulting in the extensive pattern of growth. From an institutional point of view, uneven social power between government and public, central government and local governments, capital owners and labor force, and so on, can be viewed as the main reason for the extensive pattern of growth and uneven national income distribution. Low wage, which has been the main factor for the comparative advantage, now turns out to be barriers to boosting domestic demand. The technology lag in the manufacturing industry also has a significant negative impact on improving labor productivity and increasing per capita income. Hence, to deal with the recession, not only quantitative easing, but also structural adjustments are needed.

Keywords uneven expenditure      structure of national income      extensive pattern of economic growth      economic structural adjustment     
Corresponding Author(s): Wenpu Li,; Min Gong,   
Issue Date: 05 June 2011
 Cite this article:   
Wenpu Li,Min Gong. China’s Growth Model and Structural Unbalance in the Open Economy[J]. Front Econ Chin, 2011, 6(2): 327-344.
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Wenpu Li
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