China’s Integration into the World Economy ed. by John Whalley, and: China and the Global Economic Crisis ed. by Zheng Yongnian and Sarah Y. Tong (review)

The questions raised by China’s past performance and future aspirations are many and not easy to answer. Even the past remains controversial and subject to various interpretations. The record of impressive growth notwithstanding, controversies range from the growth’s exact nature to its distributional and ecological aspects. Equally unsettling are the questions regarding the future of the Chinese economy and implications for the global economy of China’s integration into it.

Both of the volumes reviewed here contain a wide range of essays and models and are, therefore, most timely and welcome. Both contain wide-ranging contributions from a number of authors, many of whom are Chinese, and a wealth of observations and analyses that are useful for posing and answering some of the relevant questions alluded to in the previous paragraph. There is one methodological difference that stands out. The Whalley volume is mainly composed of modeling and simulation exercises, while the Zheng and Tong volume relies on a more diverse set of historical, social, political, and economic analyses. Thus, each volume makes both methodological and substantive contributions in its own way.

The volume edited by Whalley contains twelve papers that he has authored or coauthored over the last few years. These all explore aspects of China’s integration into the world economy. As Whalley points out:

This integration has been one of the most dramatic economic events since the period of the Second World War. Since the mid-1970s, China has increased its real income per capita by approximately eight times. China has grown from having trade substantially smaller than that of Hong Kong back in the 1970s to a position today where China is the second largest trading country among all global traders. China accounts for nearly 50% of all inward foreign investment coming from the OECD. China has made tremendous progress in terms of poverty alleviation, with sharp reductions in the numbers of individuals and households below the poverty line, although this has been accompanied by a sharp increase in relative inequality particularly between urban and rural areas.

(Whalley, p. vii)

Nonetheless, there are many unanswered questions. Whalley and his coauthors recognize many of the controversies. As Whalley mentions at the beginning:

How all this has been accomplished is still a subject of substantial debate and difference of position in literature. There are those, such as Paul Krugman, who characterize Chinese growth as a triumph of perspiration over inspiration, emphasizing the role that physical capital accumulation has played in this process. However, more recent policy announcements in China attach great significance to the educational process in China, where there has been an enormous four-fold increase in the number of graduate and undergraduate students since the late 1990s and the generation of ideas, and the sharp growth which has taken place in China’s trade in information technology products. These products now account for nearly 40% of China’s exports, whereas back in the mid-1990s, they were perhaps no more than 2%, with textiles and apparel being a much more prominent and important component of China’s exports.

These controversies are central to this integration process. Insofar as the widely held belief in China has been that the major driver of China’s growth has been its integration into the global economy, which accelerated greatly after 1992 with changes in policy structure and large inflows of foreign direct investment. Following this there was significant growth of exports, then with further elevation following China’s successful accession to the WTO in 2001. In recent years, China’s export growth had been running at nearly 30% per year, pre-financial crisis, but in the...