By Zhao Changwen, Research Institute of Industrial Economy & Zhu Hongming, Research Institute of Finance, DRC

Research Report, Special Issue No.45(Total 1520) 2016-12-5

Abstract: The course of China’s economic growth can be described as a “protracted war”, which means a sound development in the long run but with difficulties in the short term. The report tries to answer the question why China’s economic growth is like a protracted war and why it cannot be explained by the theory of collapse or reverse economics. First of all, two decisive factors in long-term economic growth have been identified, namely the late-development advantage and institutional reform, according to which economy can be divided into four kinds, i.e. innovative developing economy, innovative developed economy, fossilized developing economy and fossilized developed economy. There exist significant differences in the long-run growth performance of different economies. In addition, political-economic ecology is introduced to explain short-term growth performance. Based on such a framework, and with regard to economies experiencing a downturn economic performance, there are three development prospects including economic reversal, long stagnation and protracted war resulting respectively from late–development advantage, institutional reform and political-economic ecology. China’s economic growth is featured by a strong late-development advantage, sound institutional reform and poor economic ecology. As a result, China’s economic growth will experience a long development course like a protracted war.

Key words: late-development advantage, institutional reform, protracted war, political-economic ecology