Post-socialist transformation and growth regime: some comments about the Chinese case

Abstract

This article attempts to show that Chinese post-socialist transformation has involved a deep change in its growth regime. China's current growth strategy is the consequence of institutional changes that operated from the end of the seventies. Thus, since its transition is gradual, the economic system is "hybrid" with both capitalist and socialist elements. During the Maoist era, the growth strategy took the form of a "forced growth" as theorized by Kornai (1972). Today, it is not the case anymore since China follows an export and investment-led growth regime. Indeed,"investment hunger", inherited from the socialist system, is still standing and the economic opening of China results in an increase of its exports. This new situation could be particularly difficult to manage with respect to inflation stabilization and China’s dependence on external demand in a context of low domestic-demand. In particular, the main difficulty to which this export-led growth regime could be confronted with concerns the occurrence of an external contraction in the US. We then try to assess why such an event may appear by providing a list of external risks and their possible outlets in order to emphasize the economic vulnerability of China. Finally, we conclude on the difficulty to switch regimes and to adopt a more balanced growth strategy.