Currently, tapping into the impetus and potential of growth has become the focus of China’s economic development.

 

China has sustained rapid economic growth since implementing its reform and opening-up hailed as a “Chinese miracle.” However, annual growth rate of the Chinese economy has slowed in recent years, dropping to 7.4 percent in the first half of 2014. Currently, Chinese economic growth is relatively slow but more sustainable. How to tap into the impetus and potential of growth has become the focus of China’s economic development.

 

Total factor productivity (TFP), relating a measure of output to all inputs and stressed in growth economics, is especially worthy of attention when considering the impetus of long-term growth. The new growth theory emphasizes that sustainable growth results from the promotion of TFP, which refers to efficiency improvement and technical innovation.

 

To realize the transfer from investment-driven growth to efficiency- and innovation-driven growth, we believe that “structure” is the key factor in influencing efficiency of resource allocation and technical innovation.“Structure” here means industrial structure (macrostructure and microstructure), spatial agglomeration structure and social stratification structure that affect the potential of long-term growth.

 

Development economics focuses more on difference in economic structure and inserts it into the analytical framework of growth. On a microscopic level, two Massachusetts Institute Of Technology economics professors, Abhijit Banerjee (1961-) and Esther Duflo (1972-), first proposed that improper resource allocation among heterogeneous enterprises may result in differences in TFP between developing countries, despite the most advanced production technology used in some enterprises. Currently, with the improvement of availability of micro-data in enterprises, it has become a hot topic of research in growth to explore the relations between the distortion of resource allocation and TFP.

 

On a macro level, Colin Clark (1905-89), Hollis B. Chenery (1918–94), and Simon Smith Kuznets (1901-85) all stressed structural transformation in the process of growth. Statically, different industrial structures will form different total economic productivities. Dynamically, industrial sectors are quite different in technical progress speed and there are different types of technical innovation including general technology and directional technology. Therefore, with different levels of technology, technical progress of overall economy is closely linked with industrial structure and development policy of directional industry.

 

With the revival of regional and urban economics and the rise of new economic geography in recent years, space factors neglected by economists before have attracted much attention. Technical progress and industrial structure transformation in the process of modern economic development are inseparable from spatial agglomeration of economic activities.

 

In addition to economic structure, social structure should also be taken into consideration of economic growth. In fact, economic development includes economic growth and social development. Karl Marx(1818-83) and Max Weber(1864-1920) both elaborated on relations between economy and society in their exemplary research on economic development. After economics is separated from sociology, re-emerging New Economic Sociology emphasizes discussing economic issues from sociology perspective.

 

Social structure has more meanings, compared with economic structure. Generalized social structure even includes economic structure. Narrow social structure means social stratified structure, also known as class, and its mobility stressed by most scholars in sociology, which are key factors in affecting the impetus of long-term growth.

 

All in all, we should study the influence of core structural factors on production efficiency and technical innovation from levels of economic and social structure while seeking the impetus of economic growth. On the micro level of economic structure, we should further explore key factors that result in the distortion of resource allocation. On the macro level, we should study the coordinated development of industrial structure transformation and spatial agglomeration.

 

In terms of social structure, social stratification and its mobility have essential impact on economic growth in aspects of cultural values, human resource allocation and human capital enhancement. Currently, research into relations between social stratification and its mobility and economic growth urgently needs to be advanced.

 

Shao Yihang is a professor and Liu Ya’nan is an assistant professor at the School of Economics at Xiamen University.