Innovation and economics- China economy growth Essay

Submitted By xuezhou_wang
Words: 2016
Pages: 9
Open Document
CHINESE ECONOMIC GROWTH
Ejiroghene Ajari (01017696)
Faisal Alshalan (01011564)
Jianjie Zhao (00994068)
Sonal Chopra (01014144)
Xuezhou Wang (00969291)
Yiannakis Charalambous (00980154)

Economics and Strategy for Innovation
Professor J. Haskel
22/10/2014

1

CHINESE ECONOMIC GROWT H

Question 1
T able1. Cumulative Average Growth Rate (CAGRs)(1952-2008)
Year
1952-1978
1978-2008

Year
1952
1978
2007

Y
5.1%
9.6%

L
2.1%
1.7%

h = H/L
1.6%
1.2%

K
8.7%
9.7%

T able 2. Economy Factors of China (1952 - 2008)
Output
Input
Y
L h=H/L K
162,655,626,000
282,000,000
1.10
147,292,230,037
587,000,040,000
484,000,000
1.65
1,301,869,215,998
8,444,953,000,000
781,000,000
2.33
18,957,094,811,042

T he steps to get the cumulative average growth rates:

T hen:
⁄

⁄

T hus, for the year 1952 – 1978, the CAGRs of Y is 5.1 percent. After applying the formula above to all factors, we would get the CAGRs for L, h and K, which are 2.1%, 1.6% and 8.7%. While for the year
1978 – 2007, the CAGRs of Y is 9.6 percent. At the same time, the CAGRs for L, h, K are 1.7%, 1.2%,
9.7%.

Question 2
Year
1952-1978
1978-2007

T able 3. Cumulative Average Growth Rate (Including ∆lnTFP)
Y
L h=H/L K
5.1%
2.1%
1.6%
8.7%
9.6%
1.7%
1.2%
9.7%

∆lnT FP
-1.1%
3.4%

By inputting the CAGRs of Y, L, h and K into the formula, we get the numbers for ∆lnT FP (T able 3).

1

2

CHINESE ECONOMIC GROWT H

Between 1952 and 1978, the Labor quantity L rose by 2.1% per year, the average labor quality of workforce h rose by 1.65% per year, and Capital K rose by 8.7% per year. T hough the economy was growing with an average rate of 5.1%, the ∆lnT FP is only -1.1%, meaning the T otal Factor Productivity
(T FP) was decreasing annually. In this time period, the main driver for Chinese economy is the Chinese policy of industrialization, and more specifically, the capital accumulation. As Zhu (2012) mentioned,
China’s government mobilized the resources for investment by limiting household consumption and setting low prices for agricultural goods so that forced savings and surpluses extracted from the agricultural sector could be used for investment in other industries.

In contrast, from 1978 to 2007, the graph below shows the economy had a greater increase in T FP, from 1.1% to 3.4% per year. Compared to the factors in the first time period, t hough the economy of China was achieving a growth rate of 9.6%, the growth rates of the input in human, labor and capital saw a slight change. Between 1978 and 2007, T FP has played an important role contributing to the rapid growth of
China. T he rise in T FP was two fold. First, the productivity growth reduced employment in the agricultural sector and relocated them in other sectors. Secondly, the structural transformation to allow the development in the private sector enhanced competition between private companies and stated owned enterprises that may have stimulated the innovation in technology (Zhu 2012).

2

3

CHINESE ECONOMIC GROWT H

Question 3
ΔlnT FP refers to the change in “T otal Factor P roductivity” (T FP) and is defined as the portion of output that is not explained by the amount of inputs (capital and labo ur) used in production Comin (2006). T here are four major contributors to growth, including: human capital, gro wth in labour participation rate, gro wth in capital/output ratio and growth in total factor productivity. It is widely believed that the level of
T FP is the most important element to a country’s economic growth and is dictated by the deployment of inputs utilized in production in relation to its efficiency and intensity.

Zhu (2012) establishes that China’s growth performance differs significantly before and after 1978.
Between 1952-1978, the annual growth rate was 5.1% per year. As the data suggests, the growth was mainly due to increases in both physical and human capital. Ho wever, gro wth in china was stagnated by inefficiencies in T FP and innovation. T he calculations denote a decline in the T FP by 1.1% per
Show More

Related Documents: Innovation and economics- China economy growth Essay

Business Innovation In China

Introduction Business innovation is an essential component that plays an important role in the growth and development of a country. Innovation can be in the form of the creation of new technological practices for improving the current product line or the creation of entirely new products. The economic performance of a country is also associated with the extent of business innovation. By integrating the resources, implementing change in the policies and procedures of the country, innovation can be effectively…

Words 2103 - Pages 9

China: Currency and United States Essay

Roland Bushell International Economics The Rise of China In the last 30 years China has made unprecedented economic advancements. This climb as been astounding and, while some see it as a sign of progress being made in the “global-south”, many characterize this ascent as a threat to the “global-north.” China’s economic growth has placed them at number two in the global economic rankings, second only to the United States. The fairness and validity of this massive growth spurt has been questioned…

Words 1753 - Pages 8

Water Pollution In China

Introduction to China china lies in the south surrounded by 40 nations. It has a world largest population which is about 1.3 billion. Every five people in the world one is Chinese. There are 56 ethic group. Han Chinese ethic group has largest 92% population. China is a single state party governor by Communist Party of China whose power strength constitute in the Chinese constitution. People follow Confucianism, Buddhism, Taoism as their religion. There are Chinese Muslim too. China is the oldest civilization…

Words 1977 - Pages 8

Essay on Intellectual property issue in China

(Jack, 2013). For example, emerging economies have taken globalization’s opportunities to boost economic growth and development through attracting foreign investment. In emerging economies, China has been one of the most attractive markets for foreign firms since economic reforms 1970s with rapid economic growth and large population. According to World Bank (2014), China became the second largest economy in the world and it has significant impacts on the global economy. Despite of Chinese market offers…

Words 1819 - Pages 8

China’s Upcoming Economic Transformation and Its Business Opportunities Essay

Business Paper China’s Upcoming Economic Transformation and Its Business Opportunities INTRODUCTION In the world of global business the only thing constant is Change. Changes can come in many forms, some are market driven some are policies driven. Whatever the cause may be, certain changes be profoundly impactful; business leaders need to adapt and prepare their businesses to maximize profits in the future. This paper will touch briefly on some of the steps China is taking to better position…

Words 982 - Pages 4

Comparing The Annual Average Growth Rates Of High-Technology Investments Over The Industry

PAGE 9 Comparing the annual average growth rates1 of high-technology manufacturing relative to the growth rates of total manufacturing, Figure 13 reiterates that China has gone through a period of rapid catch-up. The figure demonstrates the high growth rate of Chinese high-technology exports over the period 1992-2001 (21.7% annually) figure showed high-technology exports have grown faster than total manufacturing, meaning a growing share of high-tech goods in total manufacturing. between…

Words 741 - Pages 3

Essay about Final 2 Hojjat

State of economy- appreciation of currency Interest rate increase inflation decrease productivity decrease- higher inflation- appreciation export/ import 2. What are economic consequences of a weaker dollar? *** - Imports increase - Job losses (1.6 million in manufacturing sector between 2001-2008) - Depress wages - Middle class suffers Are there any benefits of having a weaker dollar? **** China is the 2nd largest economy in the world and American companies are operating in china. 25 % of…

Words 1440 - Pages 6

The Fall of China Essay

Acheampong 1/10/13 The fall of China During the European medieval period (1000-1400), China was the most advanced nation in the world, and with its booming economy, the sky was the limit. Despite the bright future ahead of them, China started to decline and Europe emerged as leaders of the world. China’s belief in Confucian ideals limited trade, growth and innovation due to its strong belief in stability. Secondly, China’s system of trade wasn’t…

Words 1306 - Pages 6

Can the Concept of ‘Early’ and ‘Late’ Industrialization Explain the Key Institutional and Organizational Characteristics of National Business Systems, and Do They Have Any Bearing on Long-Term National Competitiveness? Essay

They are normally directed by the state, and the stock market does not exist. Therefore, they tend to rely on bank oriented financial system, which may help develop economy rapidly. There are more obligations for organizations and banking system to enhance corporate financial performance, rather than gaining values and money with stock market. Both German and Japanese financial systems possess a long term perspective…

Words 2523 - Pages 11

Economic Inequality In Canada

Economic equality is a fundamental aspect that defines the stability and health of a nation. Governments play a pivotal role in shaping economic landscapes and, consequently, the distribution of wealth among citizens. This essay examines the contrasting approaches of Canada and China towards economic equality. Canada, with its liberal market economy, balances individual freedoms with a well-established social welfare system. In contrast, China's command economy exercises significant government control…

Words 730 - Pages 3