The Chinese growth trajectory from a Post Keynesian-Structuralist-Developmental perspective

The Chinese growth trajectory from a Post Keynesian-Structuralist-Developmental

perspective

Roberto Alexandre Zanchetta Borghi – [email protected] Student, Centre of Development Studies

12th International Post Keynesian ConferenceSeptember 2014

mailto:[email protected]

Introduction

• China’s growth miracle: 10% a year over the last 30 years

• Which pattern has China followed? Does integration into international markets mean higher growth?

• Post Keynesian-Structuralist-Developmental framework to understand sustained trajectories of economic growth

• Aim of this paper: to offer an alternative perspective on China’s growth in the light of the Post Keynesian-Structuralist-Developmental framework

• National account data and input-output analysis to depict China’s major demand-supply transformations

Presentation Structure

• Section 1: the Post Keynesian-Structuralist-Developmental framework

• Section 2: input-output methodology

• Section 3: Chinese demand-supply transformations

1. Post Keynesian-Structuralist-Developmental framework

• (i) Central role played by demand, particularly investment:

• Demand as the primary inducement to produce

• Demand stimuli and multiplier effects

• Investment at the core of economic growth

• But prone to wide fluctuations

• State interventionism


• (ii) Compatible response of supply to assure demand to be domestically effective (i.e. higher level of domestic economic activity with lower exposure to BoP growth constraints):

• Strengthening of interindustry linkages and consolidation of a diversified and integrated domestic productive structure

• Structural composition of supply between sectors: manufacturing growth-enhancing properties

• Dynamics of domestic and foreign supply


• (iii) National policies to promote an international insertion that maintain and possibly upgrade the domestic productive structure with high investment levels:

• Infant industry argument and regulation of trade and capital flows

• Inward- / Outward-looking development strategy

• Economic openness is about how it has been promoted

• Exports as a source of necessary foreign exchange to assure imports for economic development

• Historical national account data: Chinese Statistical Yearbooks of the National Bureau of Statistics of China

• WIOD: 1995-2009 Chinese input-output tables

• 17-sectors industry-by-industry matrix:

• (1) Agricultural Commodities; (2) Mineral Commodities; (3) Food and Beverages; (4) Textiles and Footwear; (5) Refined Oil and Fuels; (6) Chemicals and Plastics; (7) Metals and Non-Metallic Minerals; (8) Machinery; (9) Electrical Equipments; (10) Transport Equipments; (11) Other Manufacturing Activities; (12) Utilities; (13) Construction; (14) Trade; (15) Transport and Food Services; (16) Financial Services and Real Estate; (17) Public Administration, Education and Health

2. Input-output methodology

• Input-output indicators:

• Output multipliers

• Generator of value-added decomposed by final demand components

• Hirschman-Rasmussen backward and forward linkages

• Normalised pure backward, forward and total linkages

• Fields of influence

• Trade coefficients (export, import penetration and imported input coefficients)

2. Input-output methodology

China – GDP annual growth rate by sector, 1978-2012 (%)

Source: author’s elaboration based on 2013 Chinese Statistical Yearbook.

3. Chinese demand-supply transformations

-2

0

2

4

6

8

10

12

14

16

18

20

22

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

GDP Primary Sector Secondary Sector Tertiary Sector

China – Contribution share by sector to the GDP growth, 1979-2012 (%)

Source: author’s elaboration based on 2013 Chinese Statistical Yearbook.Note: the sum of all three columns of each year equals 100%.


-5

10

25

40

55

70

85

100

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Primary Sector Secondary Sector Tertiary Sector

China – GDP composition by expenditure, 1978-2012 (%)

Source: author’s elaboration based on 2013 Chinese Statistical Yearbook.


-10

0

10

20

30

40

50

60

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Rural Household Consumption Urban Household Consumption Government Consumption

Gross Capital Formation Net Exports Total Household Consumption

China – Generator of value-added by final demand components, 1995-2009 (%)

Source: author’s elaboration based on WIOD Chinese tables.


0

10

20

30

40

50

60

70

80

90

100

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Household consumption Government expenditure Investment Exports

China – Sectoral generator of value-added by final demand components, selected sectors, 1995-2009 (%)



0

20

40

60

80

100Agr. Commod.

0

20

40

60

80

100Text. & Foot.

0

20

40

60

80

100Elect. Equip.

0

20

40

60

80

100Met. & Non-Met. Miner.

0

20

40

60

80

100Machinery

0

20

40

60

80

100

Construction

China – Hirschman-Rasmussen backward and forward linkages, average 1995-2009

Source: author’s elaboration based on WIOD Chinese tables.Note: circle size represents the output multiplier, so that the bigger the circle, the higher the multiplier.


0.4

0.6

0.8

1.0

1.2

1.4

1.6

0.4 0.6 0.8 1.0 1.2 1.4 1.6

BL

FL

Mineral Commod.

Utilities

Ref. Oil & Fuels

Chem. & Plastics

Met. & Non-Met. M iner.

Other Manuf. Act.

TradeFin. Serv. & Real Estate

Transp. & Food Serv.

Agric. Commod.

Public Adm., Educ. & Health

Construction

Food & Beverages

Text. & Foot.

MachineryTransp. Equip.

Elect. Equip.

Dependent on interindustry supply

Dependent on interindustry demand

Generally dependent sectors

Relatively independent sectors

China – Normalised pure total linkages, selected years



0.0

0.5

1.0

1.5

2.0

2.5

3.0C

onst

ruct

ion

Met

. & N

on-M

et. M

iner

.

Ele

ctric

al E

quip

.

Che

m. &

Pla

stic

s

Pub

lic A

dm.,

Edu

c. &

Hea

lth

Tra

nsp.

& F

ood

Ser

v.

Fin

. Ser

v. &

Rea

l Est

ate

Mac

hine

ry

Foo

d &

Bev

erag

es

Agr

ic. C

omm

od.

Tex

tiles

& F

ootw

ear

Tra

de

Tra

nspo

rt E

quip

.

Oth

er M

anuf

. Act

.

Util

ities

Min

eral

Com

mod

.

Ref

. Oil

& F

uels

1995 2000 2005 2009

China – Fields of influence, selected years



Export Coefficient and Percentage Share of Exports by the Two Main

Export Sectors



Imported Input Coefficient and Percentage Share of Imports by the

Two Main Import Sectors

0

5

10

15

20

25

30

35

40

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% E

xpo

rts

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Exp

ort

Co

effi

cien

t

Text. & Foot. (% Exp) Elect. Equip. (% Exp)

Text. & Foot. (EC) Elect. Equip. (EC)

0

5

10

15

20

25

30

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% Im

po

rts

for

Inte

rmed

iate

Co

nsu

mp

tio

n

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

Imp

ort

ed In

pu

t C

oef

fici

ent

Met. & Non-Met. Miner. (% Imp) Elect. Equip. (% Imp)

Met. & Non-Met. Miner. (IIC) Elect. Equip. (IIC)

• Chinese economy: gradual integration into international markets

• Economic reforms according to Chinese needs

• Post-1978 economic growth: strong industry and services growth

• Domestic market as the main source of economic dynamism: profound changes in household consumption and high investment levels

• Consolidation of both highly investment-oriented and export-oriented sectors in the domestic productive structure

• Higher export levels enabling necessary imports, mostly directed to the productive process

• Chinese growth pattern understood as an investment-cum-foreign exchange growth with diversification and deeper integration of industrial production

Concluding remarks

The Chinese growth trajectory from a Post Keynesian-Structuralist-Developmental perspective

Economy & Finance

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