Sustaining Growth of the People's Republic of China

Abstract

This paper reviews economic growth theory in the framework of economic development and explores the possibility of sustained growth in the People's Republic of China (PRC) in the long run. We argue that the PRC has the potential to sustain relatively high growth rates. First, since the technological gap with major developed countries still exists, the PRC can continue to enjoy its “advantage of backwardness” in the near future. Second, large-scale infrastructure investment, which began several decades ago, may possibly extend to the future and provide the country a basis for further growth. Third, structural readjustment, which is needed in many areas, should similarly be able to support the Chinese economy. This paper argues that to sustain long-term growth in the PRC, a number of general preconditions need to be fulfilled—these include well-functioning markets, a minimum amount of investment, continued structural upgrading, and effective government.