Structural Reform for Economic Growth

• Author: Xiaojing Zhang,Fang Cai
• Published date: 01 December 2017
• DOI: http://doi.org/10.1111/1467-8462.12248
• Date: 01 December 2017

Policy Forum: China’s New Model of Growth, Challenges and

Progress

Structural Reform for Economic Growth

Fang Cai and Xiaojing Zhang*

Abstract

This article examines the role of reform in

maintaining economic growth in the circum-

stances in which work-age is declining more

rapidly than total population. Traditional

factor-driven growth can still contribute if

reform increases labour force participation,

most signif‌icantly through easing restrictions

on rural–urban migration through reform of

the household registration system and other

means. The other potential contributor to

growth in the new era is reform to raise

productivity. This requires more fundamental

institutional change, which depends on clear

visions of the framework for a modern market

economy, encompassing the rule of law and

stronger property rights.

1. Introduction

After three decades of double-digit growth,

China’s economy has now moved into a period

of slower potential growth rates known as the

‘new normal’. To realise sustainable growth

from now on, China must capture dividends

from reform. This article analyses progress in

deepening the market-oriented reforms that

began in the late 1970s. It concludes that the

best way for China to capture reform dividends

is to further clarify the direction of reform, to

promote institutional reforms and to restructure

incentive mechanisms to mobilise enthusiasm

across all of Chinese society.

The keys that unlocked China’s economic

miracle over the past few decades were market-

oriented reform and opening-up to the interna-

tional economy. After the 18th National People’s

Congress of the Communist Party of China (CPC)

held in 2012,

1

and especially following the third

plenary session of the 18th CPC Central Commit-

tee in November 2013, a new agenda for reform

was set. This agenda outlined that China should:

(i) continue to promote improvement and

development of the socialist system with

Chinese characteristics, and increase

social productivity, thereby releasing the

creativity across society;

(ii) promote sustainable and healthy develop-

ment, and to continue to improve people’s

wellbeing;

(iii) maintain the vitalityof the socialist system

in a context of global interdependenceand

institutional competition.

* Cai and Zhang: Chinese Academy of Social Sciences,

Beijing 100732 People’s Republic of China. Correspond-

ing author: Cai, email <caifang@cass.org.cn>.

The Australian Economic Review, vol. 50, no. 4, pp. 450–9

°

C2017 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research

Published by John Wiley & Sons Australia, Ltd