CHINA’S GREAT ASCENDANCY AND STRUCTURAL RISKS:
Consequences of Asymmetric Market Liberalization
Huang Yiping[1]
China Center for Economic Research
National School of Development at Peking University
Beijing, 100871, China
Email: yhuang@ccer.edu.cn
No. E2009003 June 4, 2009
Forthcoming in Asian Pacific Economic Literature
China’s Great Ascendancy from a poor agrarian economy to an economic superpower is unprecedented. But in the process, structural imbalances, resource inefficiency, and income inequality worsened rapidly. It is argued that the coexistence of China’s extraordinary growth and serious structural risks are two sides of the same coin: asymmetric liberalisation of product and factor markets. Distortions in markets for labour, capital, land, energy, and the environment lower production costs, increase corporate profits, raise investment returns, improve the international competitiveness of Chinese goods, and therefore lift China’s growth. But they also depress consumption. China needs to accelerate factor market liberalisation in order to complete the transition to a market economy and to lock the economy onto a more sustainable path.
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[1] Many ideas presented in this paper were first formed during joint work with Shen Minggao and developed through discussions with many economist colleagues in Hong Kong, Beijing, and Canberra. Adrienne Lui and Lynn Song provided able assistance. I also wish to thank the China Economy and Business Program at Crawford School of Economics and Government of The Australian National University for providing me an opportunity to refocus on academic research.
