China’s industrial growth:capital-driven or resource-driven?

ZHANG Qizi ( 张其仔)1 and GUO Chaoxian ( 郭朝先)2

1 Professor, Institute of Industrial Economics, CASS
2 Associate Professor, Institute of Industrial Economics, CASS

Editorial Note:In recent years, resources have increasingly become a hot topic, while economic growth remains the dominant theme; therefore, the environment, resources and economic growth have become important related subjects for economists. Industry constitutes the largest part of China’s national economy in terms of output value, whose growth largely determines overall economic growth. After considering resources factors, the author concludes that China's industrial growth is still resource-driven. This indicates that China's overall economic growth is largely dependent on resources. These studies will help us to understand China’s resources and economic growth.

Issues in China surrounding resources havereceived increasing attention in recentyears, but studies on the issue are severely divorced from those on economic growth.Research has focused on the costs of resources in economic growth and development, whereas economic growth research emphasizes results brought by capital, labor and technological progress and concludes that capital is the key factor driving the growth and that technological progress plays a rather limited role. This conclusion now has been called into question mainly because capital represents technological progress and the progress’s role may be underestimated under the traditional Solow residual measurement (Zhao Zhiyun and Lu Bingyang, 2007). The doubt cast over the conclusion is absolutely reasonable. No matter how one defines the relationship between capital and technology, if we overlook the necessity of investment in resources or overestimate the role of capital or technology, we are then prone to misjudge the basic issues of China’s economic development stage and the category of its economic growth. Such misjudgment would blur the vision of the government in making decisions and eventually harm China’s economic growth. Therefore,a key issue that needs to be clarified in economic growth research is whether China’s economic growth has rid itself of its dependence on resources.