Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
China's Macroeconomic Development: The Role of Gradualist Reforms
Journal of Economic Literature
(pp. 1331–62)
Abstract
This paper provides analytic guides to recent literature on China's macroeconomic development, emphasizing the critical role of the gradualist reform approach. Our analysis suggests that from 1978 to 1997, the gradualist approach contributed to China's aggregate total factor productivity and economic growth primarily through policies that facilitated the reallocation of surplus labor from agriculture to nonagricultural sectors. Since 1998, the government's focus shifted, with various reforms encouraging large enterprises, whether state owned or privately owned, to enter capital-intensive sectors, making capital deepening the main driver of economic growth. While this strategy sustained China's GDP growth, it also increased trade tensions with global partners, created barriers to transitioning to a consumption-led economy, and threatened China's long-term financial stability, casting long shadows over the Chinese economy.Citation
Chen, Kaiji, and Tao Zha. 2025. "China's Macroeconomic Development: The Role of Gradualist Reforms." Journal of Economic Literature 63 (4): 1331–62. DOI: 10.1257/jel.20251631Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- F14 Empirical Studies of Trade
- L16 Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
- O11 Macroeconomic Analyses of Economic Development
- O47 Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- P21 Socialist Systems and Transitional Economies: Planning, Coordination, and Reform
- P24 Socialist Systems and Transitional Economies: National Income, Product, and Expenditure; Money; Inflation