Economic Growth and Income Distribution

Abstract

Over the past few decades, the Chinese economy has experienced a number of dramatic changes. Specifically, China’s macroeconomic performance experienced steady growth in the first Five-Year Plan (1953–57), a short leap forward followed by a sudden economic disaster in the period 1958–62, a rapid growth period (1963–65), a chaotic period stemming from the “Cultural Revolution” movement (1966–76), and a fast growth period (1977–) during the post-reform era, with a few exceptions in 1981 and 1989–90 (see Figure 6.1). Particularly praiseworthy in the light of all of these developments is that the economic growth of China has been sustained an average annual rate of about 10 percent since 1978, making it one of the most dynamic economies in the world during the same period. This average growth rate is approximately three times that the average of the developed nations, more than double that of India, whose conditions are similar to those of China, and even higher than that of the newly industrialized economies (NIEs) including South Korea, Taiwan, Hong Kong and Singapore.

There was a man who was hawking spears and shields. To advertise the firmness of his shields, he shouted, “Look, my shields are very strong. Nothing in the world, no matter how hard and sharp, can penetrate my shields.” A moment later, the man put down his shield and picked up a spear. Brandishing the spear, he cried, “Look, my spears are the best under heaven. They are so hard and sharp that they can penetrate everything, no matter how tough and strong it might be.” “How about using your own spear to try on your own shield?” someone asked. The man could not make a reply.

— An ancient Chinese fable