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Foreword vii
Introduction xi
Chapter 1 An Overview of Structural Economics 1
Chapter 2 The Theory of the Evolution of Economic Structure 29
Chapter 3 The Theory of the Imbalance of Economic Structure 51
Chapter 4 The Interaction of the Evolution of
Economic Structure and the Resource Environment 73
Chapter 5 Evolution and Imbalance of
China’s Investment and Consumption Structures 97
Chapter 6 Evolution and Imbalance of China’s Industrial Structure 123
Chapter 7 Evolution and Imbalance of China’s Financial Structure 153
Chapter 8 Evolution and Imbalance of
China’s Regional Economic Structure 187
Chapter 9 Evolution and Imbalance of
China’s Balance of Payments Structure 213
Chapter 10 I ntegrated Analysis of the Imbalance of
China’s Economic Structure 239
Contents
Chapter 11 S trategic Orientation of
China’s Economic Structural Adjustment 279
Notes 315
References 329
Index 339
vi
As a sub-discipline of economics, the emergence of structural economics is quite
a recent phenomenon. I did not hear of the saying of structural economics until
1990s; instead, what crossed my mind was structuralism in economics. The
founder of economic structuralism is Raúl Prebisch, the renowned left-wing
economist and director of Economic Commission for Latin America. Structural
economics is a school of development economics which emphasizes structural
features of an economy, rather than a sub-discipline in economics. Lance Taylor,
professor of Harvard University, published his eminent book Structuralist
Macroeconomics in 1983. He made his purpose clear at the beginning of the
book, “In an economy, if its system and behaviors of its members make some
particular pattern of resource allocation and evolution much more likely to
happen, then that economy has a structure.” In other words, any economy
features a specific system with members of not only economic people, but also
political and social people. Economic theories should not simply be the problem
concerning the maximization of a series of relationships among economic
people or the set of discussions of solutions to those problems. However, Taylor
did not specialize in the system and structure of a particular economy. Though
his book Structuralist Macroeconomics once captured people’s attention, it
has never been accessible to the mainstream of economics. It was in 1990s that
structural economics officially came into being. In 1992, Faye Duchin of New
York University, U.S., published a paper Industrial Input-Output Analysis:
Implications for Industrial Ecology, in which she claimed that structural
economics is a detailed and classified description of the entire economy from the
perspective of its specific and observable components and their relationships.
Actually, in 1988 Duchin published a book with structural economics as the
theme—Structural Economics: Measuring Change in Technology, Lifestyles, and
the Environment (Washington, D.C., Island Press, 1988). In that monograph, she
surveyed into the residential lifestyles, technological selection and their impacts
on the use of resources by combining the qualitative approaches based on
input-output analysis and the quantitative one based on social accounting. The
latest book entitled with structural economics may be Thijs ten Raa’s Structural
Economics (Routledge, 2004, Tilburg University, Netherlands). Raa believed that
the economic structure contains three elements: technologies, endowments and
preferences. The task of structural economics is to provide a national accounting
framework comprised of those three elements and analyze problems, based on
vii
Foreword
this framework, such as what effect the increase in the proportion of the service
industry will have on the speed of economic growth. His Structural Economics,
to a great extent, is the further development and application of Leontief’s input-
output analysis. Besides, it is found in various articles that discussions in terms
of research objects of structural economics. For example, Bob Williams claimed
that structural economics aims to study what influence the uneven distribution
of the stock (capital) and flow (income) of the wealth will exert on the overall
economic operation. In general, there is an immense amount of literature on
economic structures, and terms such as structural change, structural imbalance,
structural adjustment and structural reform have been frequently employed in
economics. However, as expressed by Mr Xiang Junbo, theoretical studies on
structural economics has not yet developed into an independent discipline by
now, though the theory of structural economics possesses a strong historical
accumulation.
China has accomplished an average annual GDP growth rate of 9.8% in the
past three decades, and became the world’s third largest economy with its GDP
surpassing Germany in 2007. Despite a strong economic growth, structural
problems of China’s economy are exacerbating. The most crucial problem
China faces is whether China’s rapid economic growth is sustainable. It is no
exaggeration to say that whether China’s economic growth can sustain depends
on whether its economic structure can be improved in time. From China’s
current economic reality, it seems that the inclusive problem of its economic
structure consist of two sub-problems, which are, what kind of growth to
pursue (which can be regarded as the problem of the growth quality) and how
to optimize the ratio of various elements in the economic system. In addition,
a series of problems in institutional economics behind those structural issues
require further studies.
The purpose of economic growth is to raise people’s living standards.
However, the growth of the gross domestic product cannot be equaled to the
improvement of common welfare. The measurement of living standards should
be based on the economic welfare, a broader concept. Not every economic
activity accounted into GDP can improve the national welfare; sometimes
these activities may even produce counter-effects, which are exemplified by
the environmental pollution issues. For example, profligate waste of resources
precludes the possibility of the future improvement of the national welfare.
As for China, another important issue is that due to substantial foreign capital
inflow, the GDP growth may thus, to a large degree, represent the growth of
the foreign national welfare, rather than the growth of China’s own national
welfare. What is the target mode of economic growth? How can we measure it?
viii
Foreword
What kind of institutional arrangement will secure the economic growth biasing
toward the maximization of the national welfare? These problems have yet to be
resolved by Chinese economists.
Chinese academia conducted discussions on issues in terms of the gross
social product and the proportion of the two old divisions in the 1950s and
1960s. The pursuit of the speed of economic growth led to the unbalanced
proportion of the two old divisions, which in turn caused a great volatility in
the economic growth, and consequently pushed China’s national economy
to the verge of collapse. Since the reform and opening-up, with China’s
rapid economic development, the proportional imbalance has turned into a
more complicated structural imbalance, which is featured in the investment-
consumption imbalance and international payments imbalance. China’s
investment rate rose from 38.2% in 1978 to 42.1% in 2007, whereas the
consumption rate fell from 62.1% to 49% during the same period. The increasing
investment rate indicates a rising production capacity. However, with the
declining consumption rate, the excessive production capacity can only be
absorbed through further improving the investment rate or via export; while
the improvement of the former in turn propels the further increase of capacity.
Obviously, the growth mode of absorbing the production capacity of excessive
steel by establishing more steel plants is not sustainable. With the expansion
of economic scale, it is difficult for China to absorb a huge surplus capacity via
export. The structural imbalance of international payments is another important
evidence for China’s structural imbalance. Trade surplus means capital export.
In order to pursue the optimal resource allocation, China, as a developing
country, should deploy more resources to domestic consumption and
investment, rather than to the low-yielding financial assets like U.S. treasury
bonds. China’s economy heavily depends on external demands. The unexpected
shock to its economy caused by the current global economic downturn fully
illustrates that the export-driven growth pattern is not sustainable.
Without the economic growth over the past three decades, there is no
remarkable success in today’s China. However, China, which has already
gotten rid of the “poor and blank” status, should seriously reflect on what the
development direction and growth pattern is that it needs to follow. At the same
time, we must also recognize that only with constant restructuring can China
continue ahead along the path of sustainable growth. Both the growth targets
and the institutional and structural basis for achieving sustainable economic
growth are the most important subjects in Chinese economic studies. Although
these issues are covered in the traditional political economics, development
economics, economic growth theories, macroeconomics, microeconomics,
ix
