Academic journal article World Review of Political Economy

Political Economic Analysis of China's Economic Trends

Academic journal article World Review of Political Economy

Political Economic Analysis of China's Economic Trends

Article excerpt

1. Introduction

During "the 13th Five-Year Plan" period in China, to double the size of the 2010 GDP and per capita income by 2020, the average annual economic growth must remain above 6.5% between 2016 and 2020. However, China's economy is showing a downward trend. As the statistics data released from the National Bureau show, China's GDP growth rate declined year by year from 10.6% in 2010 to 9.5% in 2011. In the following years of 2012, 2013, 2014 and 2015, it declined to 7.7%, 7.7%, 7.3% and 6.9%, respectively, a 3.7% decline in total 5 years, and 0.74% average annual decline, and further decreased to 6.7% in the first half of 2016.1 The present situation and prospect of China's economic growth are not only directly related to domestic investment, employment and income, but also increasingly affects the economic growth of the world. It is now for China a big realistic longterm issue and also a focus of attention at home and abroad how to correctly understand and evaluate China's economic growth downward trend, and its advantages, disadvantages, reasons, the prospect and the solutions, and also how to maintain over 6.5% annual economic growth during "the 13th Five-Year Plan."

This article argues that all the views and claims from the analysis based on demand theory and method of Keynesian Economics and supply school of Reaganomics are fragmentary, superficial and inaccurate. There are debatable points of view. To obtain the correct understanding, this article first compares the advantages and disadvantages of the three different methods of analyzing current economic trends and then specifically analyzes the current situation and trend of China's economic development by mainly using the supply and demand analysis and system analysis methods of Marxist political economy through drawing lessons from the relevant theories of Western economics and methods. It also positively answers the questions about how to analyze China's continuous economic decline for 5 years, and about what we should do to maintain the average annual economic growth of 6.5% from 2016 to 2020.

2. Comparisons of Three Different Analysis Methods for China's Economic Trends

In the process of economic system reform, people often analyze China's economic situation and trends based on demand theory and analysis of Keynesian Economics and put forward corresponding countermeasures for demand management. Keynesian methods can play a certain role in a certain period of time and scope, but there are serious defects with them, mainly as the following: It only pays attention to the balance of the total amount, but ignores reasonable structure optimization. It only analyzes economic phenomena and does not analyze the essence of relations of production and the root of systems in depth. It only emphasizes the demand management, and ignores supply management. It only puts forward temporary solutions which cannot fundamentally solve problems and even possibly leads to "stagflation complication" (economic stagnation and inflation coexist). Keynes had brought the Western developed countries into a "golden era" of economic growth for 20 years after the Second World War and was known as "the father of postwar prosperity." However, in the 1970s, the Western developed countries stuck in the quagmire of stagflation and got the "modern disease" which had never happened before. Keynesian Economics was on the verge of "bankruptcy."

At present, China's economy has entered into a new normal. Some scholars put forward that, to achieve high growth and to improve the quality and efficiency of China's economy, it is necessary to learn from the supply school theory of Reaganomics, use the supply analysis method and put forward measures of supply management. This is because demand analysis is aggregate, short term and limited, but supply analysis is structural and long term which is more important and better fits the actual Chinese status (see Ding 2015; Jia and Su 2015; Li 2015). …

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