China Miracle Demystified Essay

5260 WordsFeb 13, 201222 Pages
The China Miracle Demystified* Justin Yifu Lin The World Bank When China began its transition from a planned to a market-oriented economy in 1979, it was a poor, inward-looking country with a per capita income of US$182 and a trade dependence (trade-to-GDP) ratio of 11.2 percent. 1 China’s economic performance since then has been miraculous. Annual GDP growth averaged 9.9 percent over the 30-year period, and annual growth in international trade, 16.3 percent. China is now a middle-income country, with a per capita GDP of US$3,688 in 2009, and more than 600 million people have escaped poverty. Its trade dependence ratio has reached 65 percent, the highest among the world’s large economies. In 2009 China overtook Japan as the world’s second largest economy and replaced Germany as the world’s largest exporter of merchandise. China’s car market is now the world’s largest, and Shanghai has been the world’s busiest seaport by cargo tonnage since 2005. The spectacular growth over the past three decades far exceeded the expectations of anyone at the outset of the transition, including Deng Xiaoping, the architect of China’s reform and opening-up strategy.2 Interest among academics in China’s transition and development experience has increased exponentially in the past three decades.3 In this paper I try to provide answers to five related questions: Why was it possible for China to achieve such extraordinary performance during its transition? Why was China unable to attain similar success before its transition started? Why did most other transition economies,  * Paper prepared for the panel on ―Perspectives on Chinese Economic Growth‖ at the Econometric Unless indicated otherwise, the statistics on the Chinese economy reported in the paper are from the Society World Congress in Shanghai on August 19, 2010. 1 China Statistical Abstract 2010, China Compendium of

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