SOURCES OF CHINESE ECONOMIC GROWTH, 1978-1996.

SOURCES OF CHINESE ECONOMIC GROWTH, 1978-1996. By Chris Bramall. Oxford (UK): Oxford University Press. 2000. ix, 558 pp. (Tables.) [pound]65.00, cloth. ISBN 0-19-829697-5.

For two decades, from the late 1970s to the late 1990s, the growth rate of China's per capita GDP, at 8.4 percent, was among the highest experienced by any country in the post-World War II period. Growth was most rapid in the more developed coastal provinces, but was not limited to the coast. In fact growth occurred in every region, including the poorest counties. The book under review is an attempt to explain China's rapid development after 1978 and to draw lessons from its experience.

Roughly two-thirds of the book is devoted to an examination of the traditional explanatory factors for China's rising per capita income, including its favorable initial conditions, rapid accumulation of physical capital and productivity growth. Often cited favorable initial conditions include the following. Investments in physical and human capital between 1952 and the mid-1970s had given China the absorptive capacity for new technologies. It began its economic reform with almost no external debt and had a large pool of rural labor that could be shifted from agriculture to the more productive industrial sector. Bramall agrees that China was fortunate in its initial conditions, but argues that "China does not seem to have profited significantly by redeploying labour from (notionally) low productivity to (notionally) high productivity sectors" (p. 197).

China's record on human capital accumulation after 1978 was relatively poor, but its record on physical capital accumulation, particularly in the industrial sector, was impressive. Investment share in GDP increased significantly after 1978 and this played a role in the acceleration of growth. But so did productivity growth. After reviewing a large number of total factor productivity studies as well as other evidence, Bramall concludes that productivity growth was fast, occurring across the entire economy, and "goes far towards explaining why the pace of Chinese economic growth was so rapid after 1978" (p. 253).

While the above explanation identifies the proximate sources of growth, it does not address the question whether "the acceleration in growth was driven by the introduction of 'market forces,' or led by the state" (p. 467). The final one-third of the book presents the case that China's post-1978 growth can be best explained by state intervention. After examining how the government managed aggregate demand, agriculture, trade and industry, Bramall concludes that the Chinese state "assuredly, and successfully, followed a growth-promoting agenda" (p. 415), and that "it is hard to imagine that the pace of growth would have been anything like as fast if the task of growth promotion had been left to the forces of the market" (p. 300).

Bramall believes that China was able to pursue its growth-promoting agenda because rapprochement with the United States allowed it to shift its attention from security matters to economic growth and because the Chinese state was "strong" in the sense that it was able to carry out its policy. Four factors contributed to the strength of the Chinese state: (1) the legitimacy of the Chinese Communist Party was not in question in 1978; (2) the immense authority of Deng Xiaoping; (3) the absence of groups in society (e.g., land owners or industrialists) to resist government policy; and (4) a Party bureaucracy, weakened by the Cultural Revolution, that was unable to oppose the transition to the growth-promoting policies adopted in the 1980s.

Despite concluding that the experience of China in the post-1978 period "provides further support for the proposition that capitalism is not the best engine of economic growth" (p. 469), Bramall believes that the Chinese experience is not easily transferable to other developing countries. This is because "selective interventionism can work -- but only if the state is 'strong'. If the state is weak, then an interventionist strategy is bound to fail because the state will be captured by a series of rent-seeking coalitions pursuing their own interest, rather than the goal of growth promotion" (p. 470).

The implications of Bramall's analysis for China are also bleak. The legitimacy of the CCP is no longer as secure as it was in 1978. None of China's current leaders has the authority or stature enjoyed by Deng Xiaoping. With privatization and marketization, powerful new interest groups have emerged with goals other than growth promotion. In other words, the Chinese state is becoming less "strong" and therefore less able to carry out the growth-promoting agenda. "Despite the rapid growth of the Dengist era, the likelihood of China catching up with the West remains slight" (p. 471).

Bramall's views are controversial and some China scholars will undoubtedly take issues with them. I look forward to the debate.