On China’s growth story.
The latest McKinsey Quarterly carries an interesting article on the true source of China’s economic miracle. In this account, the author argues that “property rights and private entrepreneurship provided the dominant stimulus for high growth and lower levels of poverty” in modern-day China. Gains from early experimentation with private property rights and an initial burst of “rural entrepreneurialism” took place during the 1980s, and exceeded the subsequent benefits brought by high levels of public infrastructure spending and huge FDI inflows in the 1990s.
What we know as China’s growth centres – Beijing, Shanghai and Shenzhen – are, in his opinion, not the true sources of China’s dynamism. Instead, the entrepreneurial, market-led rural areas are where true capitalism, vibrancy and competition occur. As an example, the author compares the growth stories of Shanghai and Wenzhou – and concludes that Wenzhou’s rise has not only led to equivalent household incomes, but also higher returns to capital and entrepreneurship compared to Shanghai (if one looks beyond the traditional GDP per capita measure), while creating a community of indigenous entrepreneurs. (More at the link above.)
The implication? Forget about successful alternative models to capitalism and entrepreneurship – there are none to be found in China’s story.
Like this piece quite a fair bit – challenges many assumptions in the way we conventionally view economic success, particularly that the major Chinese cities are the ones to look out for and learn from.
My maiden post as a “friend-of-FG” blogger !
(And if anyone needs a new party game at Christmas, try out the Economist’s latest board game. Caution: Check for a sense of humour among participating banker-friends.)