--Research on the Historical Experience for Steady Growth

By Jiang Yu, Department of Macroeconomic Research, DRC

Research Report No 135, 2015 (Total 4820)

Abstract:

This paper analyzes reasons for China's three economic downturns since the reform and opening-up as well as management measures relating to these downturns. The tightening measures adopted after China's two economic overheating incidents in 1980s invariably led to economic downturns. But due to large potential for market-oriented reform, rapid growth of citizens' income, and relatively fair distribution as well as potential drivers for investment and consumption, China managed to attain rapid growth recovery after the austerity. China met with an economic downturn cycle with insufficient domestic demand under market economy for the first time in 1997. The main approach in response to this is "dual expansions" in both market boundary and government expenditure. On one hand, expanding the market boundary and deepening reforms in state-owned enterprises, labor, housing, medical care and education have helped incorporated more sectors into the market mechanism so as to share and transfer existing overcapacity and excess capital. On the other, the government has increased public expenses, adopted proactive fiscal policy and accelerated progress for "accession to WTO" so as to compensate inadequate domestic demand with investment and foreign demand. Generally speaking, it is through the expansionary policy that China managed to ease, share and transfer the structural conflicts within its economic system.