China actually started to grow from Mao’s period onwards (1953)..

One common narrative around Chinese high growth phase is that it all started in 1978. Post the so called Deng revolution and reforms.

Four researchers –  Anton Cheremukhin, Mikhail Golosov, Sergei Guriev, Aleh Tsyvinski – do not agree. They say it all started with Mao in 1953:

The recent turmoil in the stock market and the ongoing growth slowdown does not lessen the importance of China’s economic growth as one of most remarkable episodes of economic history. The rise of China has received much less attention from macroeconomists than it deserves.1 Moreover, most academic studies of China’s success story start with the 1978 reforms. Mao’s era is either omitted or mentioned only in the context of the disaster of the Great Leap Forward and the turmoil of the Cultural Revolution.2 This is unfortunate, as the pre-1978 period was not only one of the largest economic policy experiments and development programmes in modern history, but also an important benchmark against which the success of post-1978 reforms should be measured.

In a new paper we provide a systematic analysis of both the pre-1978 and post-1978 periods in a unified framework (Cheremukhin et al. 2015). We develop a two-sector (agricultural and non-agricultural) neoclassical model with wedges, building on the analysis of the Great Depression by Cole and Ohanian (2004) and Chari et al. (2007) and on our previous work on Stalin’s industrialisation in Soviet Russia in Cheremukhin et al. (2013).

This first q is interesting:

  • What are the main growth facts for the Chinese economy during Mao’s era and during the reform period?

To answer this question, we construct a comprehensive dataset that allows the study of the entire 1953-2012 period and the application of the neoclassical model.

In 1952-1978, China’s real GDP per capita grew at a robust 4% average annual rate. However, the economy did not experience structural transformation. Even though Chinese agriculture was very inefficient, the fraction of the labour force in agriculture declined from 83% to only 75% – the value added produced in agriculture declined from 78% in 1953 to 30% in 1977.

In 1978-2012 annual growth in real GDP per capita increased to 8.4% on average. The structural transformation also sped up. The share of the labour force in agriculture fell to 33% in 2012, and the share of value added produced in agriculture fell to 5%.

4% is robust! India is ridiculed for growing at 3.5% (infamously called Hindu rate of growth) in the same period.

Historical research keeps surprising you.

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