Please explain the main points of Michael Spence's article "Why is China Growing So Fast."

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

Basically, Michael Spence says that there are a number of conditions that need to be in place in order for fast growth to occur.  China meets all of these criteria.

First, a country needs to have a market economy.  It has to allow private property and it has to allow people to make their own economic decisions.  A command economy cannot enjoy fast growth.

Second, there has to be a great deal of investment.  China saves at 35% to 45% of GDP, which is a very high rate of savings.  These savings can be put into investments which, in economic terms, moves the productions possibility frontier to the right.

Third, there has to be resource mobility.   What that means is that some companies and industries die and others arise and take their place.  The country cannot simply do the same thing it has always done, only a little better.  It must allow, for example, people to move from farming to industry.

Finally, the country must be plugged in to the global economy.  It has to be able to trade in order to grow.

Spence argues that these conditions are what has allowed China to grow rapidly.


lolaaqui's profile pic

lolaaqui | Student, Undergraduate | (Level 3) eNoter

Posted on

Thank you.  I see you helped me to edit my question, thanks for that as well.

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