Demographics and the Labor Market

What is the “demographic dividend”? The “demographic dividend” refers to a period during which the proportion of nonworking, dependent people in a population falls substantially. This usually occurs in a traditional agricultural society in which birth rates start out very high because many children die...

Agriculture, Land, and the Rural Economy

Why does agriculture matter? It may seem odd to begin our discussion of a great industrial economy with agriculture. In China today, agriculture accounts for only 8 percent of GDP. But about 40 percent of the population still lives in rural areas, and more than...

China’s Political Economy

What is China’s political system? Understanding China’s unique and resilient governance system is essential for making sense of the country’s economic past, present, and future. We may briefly describe it as follows: China is (1) a one-party state that (2) governs in a...

The Emerging Consumer Economy

Is China’s growth “unbalanced”? How much does it matter? China from 1980 until a few years ago has been mainly an investment-driven economy. Growth has been powered by capital spending on basic industries, export-oriented factories, infrastructure, and housing. In the “expenditure” accounting that economists use...

China and the World: Is Conflict Inevitable?

For most of this book, we have considered China mainly on its own terms—as a large and interesting story of national development. But China’s rise also has important international dimensions, which became more acute following Xi Jinping’s adoption of an assertive foreign policy stance beginning...

The Financial System

What role do China’s banks play in financing growth? China has a bank-dominated financial system. About 70 percent of corporate finance is provided either by banks or by other lenders that act like banks. Only about 30 percent comes from the capital markets—issuance of stocks...

Industry, Exports, and Technology

Why did China become such a big manufacturer and exporter? China’s emergence as a great industrial, exporting, and technology power is one of the truly world-changing economic events of the last three decades. In the late 1970s, China accounted for little of the world’s industrial...

Population, Geography, and History

How does China’s size and population affect its economy? It is an obvious fact, but it bears repeating: China is the world’s largest nation by population (1.4 billion) and its fourth largest by area, with a geographic size almost identical to that of the United...

Energy and the Environment

In the preceding chapters, we have examined three of the systems that support China’s economic structure: the financial, fiscal, and enterprise systems. In this chapter, we will look at the fourth major system, energy. This is in some ways the most complex system because China’s...

The Government Finance System

Why does the fiscal system matter? There are two reasons for understanding China’s fiscal system. The first is about power relations. In a country as large and diverse as China, relations between the central and local governments are tricky to manage. The fiscal system explains...