Macroeconomic conditions of Russia’s transition to high growth rates: China’s experience

Abstract

Taking China’s economy as an example, some macroeconomic characteristics of the new economic world order, which ensure GDP growth rate ahead of the US, acceleration of innovation activity and growing influence on the structure of global finances are considered. Attention is drawn to the little-studied effect generated by the difference in financing fixed capital investment: while in China the direct use of budgetary resources for that purpose plays a major role, in the United States the indirect use of similar resources dominates. As a result, there is a lag effect, which allows China (given equal rates of the issue of money) generate a higher growth rate and lower inflation. It is shown that in Russia in 2023—2025 no changes towards China’s macroeconomic characteristics are expected. One reason lies in selective attitude of monetary authorities to the economic theory. First, the hypothesis of the neutrality of money in the long term still prevails. With the help of the shifting mode of reproduction model it is shown that this hypothesis is incorrect: in the long run, money can be both neutral and non-neutral, what matters is how a single cash flow is distributed between investment activities and the production and consumption of non-productive goods. Therefore, the possibility of switching to a policy of monetary stimulation of economic growth is ignored. Second, the macroeconomic theory of managing the transitional processes arising from a sharp acceleration in the rate of GDP is insufficiently developed. Calculations of nonstationary trajectories of GDP rates and inflation have been made, as well as ways to minimize the duration of the transition process and to mitigate inflationary fluctuations have been developed. This largely removes the problem of uncertainty in the transition process, and also makes it possible to control it. As a result, it is possible to transit to accelerated economic growth in Russia.