China's New Model session at 12th International Conference

1. The Chinese growth trajectory from a Post
Keynesian-Structuralist-Developmental
perspective
12th International Post Keynesian Conference
September 2014
Roberto Alexandre Zanchetta Borghi – razb2@cam.ac.uk
PhD Student, Centre of Development Studies

2. Introduction
• China’s growth miracle: 10% a year over the last 30 years
• Which pattern has China followed? Does integration into international
markets mean higher growth?
• Post Keynesian-Structuralist-Developmental framework to understand
sustained trajectories of economic growth
• Aim of this paper: to offer an alternative perspective on China’s growth
in the light of the Post Keynesian-Structuralist-Developmental
framework
• National account data and input-output analysis to depict China’s major
demand-supply transformations

3. Presentation Structure
• Section 1: the Post Keynesian-Structuralist-Developmental framework
• Section 2: input-output methodology
• Section 3: Chinese demand-supply transformations

4. 1. Post Keynesian-Structuralist-Developmental framework
• (i) Central role played by demand, particularly investment:
• Demand as the primary inducement to produce
• Demand stimuli and multiplier effects
• Investment at the core of economic growth
• But prone to wide fluctuations
• State interventionism

5. 1. Post Keynesian-Structuralist-Developmental framework
• (ii) Compatible response of supply to assure demand to be domestically
effective (i.e. higher level of domestic economic activity with lower
exposure to BoP growth constraints):
• Strengthening of interindustry linkages and consolidation of a
diversified and integrated domestic productive structure
• Structural composition of supply between sectors: manufacturing
growth-enhancing properties
• Dynamics of domestic and foreign supply

6. 1. Post Keynesian-Structuralist-Developmental framework
• (iii) National policies to promote an international insertion that maintain
and possibly upgrade the domestic productive structure with high
investment levels:
• Infant industry argument and regulation of trade and capital flows
• Inward- / Outward-looking development strategy
• Economic openness is about how it has been promoted
• Exports as a source of necessary foreign exchange to assure
imports for economic development

7. 2. Input-output methodology
• Historical national account data: Chinese Statistical Yearbooks of the
National Bureau of Statistics of China
• WIOD: 1995-2009 Chinese input-output tables
• 17-sectors industry-by-industry matrix:
• (1) Agricultural Commodities; (2) Mineral Commodities; (3) Food and
Beverages; (4) Textiles and Footwear; (5) Refined Oil and Fuels; (6)
Chemicals and Plastics; (7) Metals and Non-Metallic Minerals; (8)
Machinery; (9) Electrical Equipments; (10) Transport Equipments; (11)
Other Manufacturing Activities; (12) Utilities; (13) Construction; (14)
Trade; (15) Transport and Food Services; (16) Financial Services and
Real Estate; (17) Public Administration, Education and Health

8. 2. Input-output methodology
• Input-output indicators:
• Output multipliers
• Generator of value-added decomposed by final demand components
• Hirschman-Rasmussen backward and forward linkages
• Normalised pure backward, forward and total linkages
• Fields of influence
• Trade coefficients (export, import penetration and imported input
coefficients)

9. 3. Chinese demand-supply transformations
China – GDP annual growth rate by sector, 1978-2012 (%)
Source: author’s elaboration based on 2013 Chinese Statistical Yearbook.
22
20
18
16
14
12
10
8
6
4
2
0
-2
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
GDP Primary Sector Secondary Sector Tertiary Sector

10. 3. Chinese demand-supply transformations
China – Contribution share by sector to the GDP growth, 1979-2012 (%)
Source: author’s elaboration based on 2013 Chinese Statistical Yearbook.
Note: the sum of all three columns of each year equals 100%.
100
85
70
55
40
25
10
-5
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Primary Sector Secondary Sector Tertiary Sector

11. 3. Chinese demand-supply transformations
China – GDP composition by expenditure, 1978-2012 (%)
Source: author’s elaboration based on 2013 Chinese Statistical Yearbook.
60
50
40
30
20
10
0
-10
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Rural Household Consumption Urban Household Consumption Government Consumption
Gross Capital Formation Net Exports Total Household Consumption

12. 3. Chinese demand-supply transformations
China – Generator of value-added by final demand components,
1995-2009 (%)
Source: author’s elaboration based on WIOD Chinese tables.
100
90
80
70
60
50
40
30
20
10
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Household consumption Government expenditure Investment Exports

13. 3. Chinese demand-supply transformations
China – Sectoral generator of value-added by final demand
components, selected sectors, 1995-2009 (%)
100 Text. & Foot.
80
60
40
20
100
80
60
40
20
Source: author’s elaboration based on WIOD Chinese tables.
100
80
60
40
20
0
Agr. Commod.
0
100
80
60
40
20
0
Elect. Equip.
100
80
60
40
20
0
Met. & Non-Met. Miner.
0
Machinery
100
80
60
40
20
0
Construction

14. 3. Chinese demand-supply transformations
China – Hirschman-Rasmussen backward and forward linkages, average 1995-2009
1.6
1.4
1.2
1.0
0.8
0.6
0.4
Mineral
Commod.
Utilities
Ref. Oil & Fuels
Chem. &
Plastics
Generally
dependent
sectors
Met . & Non-Met. Miner.
Other Manuf. Act.
Transp. &
Food Serv.
Dependent on
interindustry demand
Fin. Serv. & Real Estate Trade
Agric.
Commod.
Public Adm.,
Educ. & Health
Machinery
Food &
Beverages
Text. &
Foot .
Construct ion
Transp. Equip.
Elect .
Equip.
Dependent on
interindustry supply
Relatively
independent
sectors
0.4 0.6 0.8 1.0 1.2 1.4 1.6
BL
FL
Source: author’s elaboration based on WIOD Chinese tables.
Note: circle size represents the output multiplier, so that the bigger the circle, the higher the multiplier.

15. China – Normalised pure total linkages, selected years
Source: author’s elaboration based on WIOD Chinese tables.
3. Chinese demand-supply transformations
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Construction
Met. & Non-Met. Miner.
Electrical Equip.
Chem. & Plastics
Public Adm., Educ. &
Health
Transp. & Food Serv.
Fin. Serv. & Real Estate
Machinery
Food & Beverages
Agric. Commod.
Textiles & Footwear
Trade
Transport Equip.
Other Manuf. Act.
Utilities
Mineral Commod.
Ref. Oil & Fuels
1995 2000 2005 2009

16. China – Fields of influence, selected years
Source: author’s
elaboration based on
WIOD Chinese tables.
3. Chinese demand-supply transformations

17. 3. Chinese demand-supply transformations
Export Coefficient and Percentage
Share of Exports by the Two Main
Export Sectors
Imported Input Coefficient and
Percentage Share of Imports by the
Two Main Import Sectors
0.6
0.5
0.4
0.3
0.2
0.1
30
25
20
15
10
5
Source: author’s elaboration based on WIOD Chinese tables.
40
35
30
25
20
15
10
5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
% Exports
0.0
Export Coefficient
Text. & Foot. (% Exp) Elect. Equip. (% Exp)
Text. & Foot. (EC) Elect. Equip. (EC)
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
% Imports for Intermediate Consumption
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
Imported Input Coefficient
Met. & Non-Met. Miner. (% Imp) Elect. Equip. (% Imp)
Met. & Non-Met. Miner. (IIC) Elect. Equip. (IIC)

18. Concluding remarks
• Chinese economy: gradual integration into international markets
• Economic reforms according to Chinese needs
• Post-1978 economic growth: strong industry and services growth
• Domestic market as the main source of economic dynamism: profound changes in
household consumption and high investment levels
• Consolidation of both highly investment-oriented and export-oriented sectors in the
domestic productive structure
• Higher export levels enabling necessary imports, mostly directed to the productive
process
• Chinese growth pattern understood as an investment-cum-foreign exchange growth
with diversification and deeper integration of industrial production