Demystifying the Chinese Economy*
Justin Yifu Lin
Chief Economist and Senior Vice President, 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, less
countries, and a
dependence (trade-to-GDP) ratio of 11.2 percent.
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$4,260 in 2010, 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.
Interest among academics in China’s transition and development experience has
increased exponentially in the past three decades.
In this speech I will draw on my
Demystifying the Chinese Economy, to
provide answers to six related
questions: Why was it possible for China to achieve such extraordinary performance
*The text of this speech is drawn on the
Demystifying the Chinese Economy,
published by the
Cambridge University Press in November 2011.
Unless indicated otherwise, the statistics on the Chinese economy reported in the paper are from the
China Statistical Abstract 2010, China Compendium of Statistics 1949–2008
, and various editions of
China Statistical Yearbook
, published by China Statistics Press.
Deng’s goal at that time was to quadruple the size of China’s economy in 20 years, which would
have meant an average annual growth of 7.2 percent. Most people in the 1980s, and even as late as the
early 1990s, thought that achieving that goal was a mission impossible.
The EconLit database includes 27 peer-reviewed scholarly journal articles with
the title published in 1979, a number that jumps to 70 for 1989 and 1,016 for 2009.