China Modernization Report 2005

¡ª¡ªA study on the economic modernization

Summary

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Economic modernization is not only an important factor but also a basic and driving power of modernization. That is to say, no economic modernization, no real modernization. In the past three hundred years, economic modernization is a main content in the change of world economy, every country has great different performance and the world economic center has changed. In fact, economic modernization is a global revolution and competition in economic field. Economic modernization includes not only economic growth, industrialization and knowledgization, but also the changes of the frontiers of world economy, the gap of international economy and so on, economic modernization is an integrated concept. The former four reports of China Modernization have systematically discussed the concept of modernization at national and regional level. In this issue we will focus on the facts and principles of world¡¯s economic modernization as well as its revelations. 

I. Facts and revelations of world¡¯s economic modernization in the past 300 years 

In this issue, we analyze the economic modernization of the world in the past three hundred years (1700-2001) by cross-sectional study and time series study, including economic efficiency, structure, institution and idea, and mainly analyze the trends, frontiers, international gap and roads in economic field. There are 15 countries (8 developed countries and 7 developing countries)  analyzed by time series study and 130 countries analyzed by cross-sectional study. Also we have concluded 26 facts and 14 revelations of world¡¯s economic modernization. 

1. 14 inspirations of world economy modernization

(1) Economic modernization is comparatively expectable.

(2) Economic modernization is a kind of revolution.

(3) Economic modernization needs a long time.

(4) Economic modernization is a complex process.

(5) Economic modernization isn¡¯t in balance.

(7) Economic modernization has possibility of stagnation, interruption and reversion.

(8) Economic modernization involves every country in the world.

(9) Economic modernization is a process of divergence of economic productivity.

(10) Economic modernization is a process of convergence of economic structure.

(11) Economic modernization is a progressive process.

(12) Economic modernization is full of risk.

(13) Economic modernization is not thoroughly a spontaneous process.

(14) Economic modernization can be analyzed quantitatively.  

II. Theories and methods of world¡¯s economic modernization 

1. Classic economic modernization theory 

Classic economic modernization theory, as an important branch of classic modernization theory, was advanced in 1950s to 1960s. The publication of ¡°The Stage of Economic Growth ¡± (Rostow, 1960 ) marked the birth of the theory.  

Classic economic modernization describes the great changes in economy field since Industrial Revolution in the 18th century, including the industrialization, increasing of productivity and continuous intensification of international economic competition. Classic economic modernization is a historical course affected by politics and culture, and also interacts with social modernization, It was restricted by science, technology and international relationship. 

The main results of classic economic modernization are: the transformation from traditional agricultural economy to modern industrial economy, formation and distribution of market economy ideas, widely application of modern science, technology and energy resources, industrialization and specialization of economic activity, mechanization and electrization of production system, increasing of industrial proportion and decreasing of agricultural proportion, continuous improvement of economic efficiency, economic welfare and equity.  

2. General economic modernization theory 

At the end of 20th century, world¡¯s economic frontiers have changed greatly, more and more new economic ideas have appeared. These changes take place in every aspect of economy field, especially in economic structure, main technique and main industry. In economic structure, the main change appeared as from industrialization to de-industrialization. In main technique, the change appeared as from industrialized, standardized technique to information and greening technique, and in main industry, the change appeared as from industry to knowledge and information industry, from agriculture, industry to service and other new industry. The classic economic modernization theory can¡¯t explain these changes. Prof He Chuanqi, a China scientist, has applied the ¡°Second modernization theory¡± into economic field, and proposed the general economic modernization theory, which extends the classic economic modernization theory. 

(1) General economic modernization theory.  

General economic modernization is the great changes in economic field since the industrial revolution in 18th century, which includes the transformation from agriculture to industrial economy and then from industrial to knowledge economy, continuous increasing of productivity and national income, great improvement of economic welfare and equity£¬and change of competitive status in the world economy. General economic modernization is a historical course with 12 features and 6 principles, and comprises the first and second stages of the economic modernization from the 18th to 21st century. It is also a constant international competition, including the international competition whereby different countries and regions pursue, reach and maintain the world advanced level of the economy. 

The model of general economic modernization includes: economic timetable, periodic table, coordinate system, road map, quantitative model and dynamic model of general economic modernization. There are three targets in general economic modernization process, which are to complete first economic modernization, to complete second economic modernization, and to reach and maintain the advanced level of the world economy.  

The driving force of general economic modernization includes four, which are the impulse of economic growth, the pull of demand change, the pressure of globalization, and the gravitation of reasonable anticipation. To be concrete, they are the increase of knowledge, social capital, material capital, human resource, ecological consciousness and knowledge consumption, as well as economic structure change and international competition.  

The roads and models of general economic modernization are diversity, which are the path-dependence and are affected by the history, geography and external condition. In the 21st century there are three basic roads: first economic modernization, second economic modernization and comprehensive economic modernization. 

(2) Second economic modernization theory.  

It is the second stage of general economic modernization. In general, second economic modernization is the results of knowledge revolution, a revolutionary change of economic field since 1970s, which includes knowledgization, informatization, greening and globalization of national economy, increase of productivity and national income, improvement of economic welfare and equity, as well as change of the status in the world economy.  

Second economic modernization is a historical process, which has the 12 features and follows the 6 principles. The result of second economic modernization includes the transformation from industrial to knowledge economy, the coordination of economy with ecology, improvement of economic competitiveness in the world, change of world¡¯s economic center and so on.  

The driving force of second economic modernization includes the improvement of knowledge, information, ecological consciousness and knowledge consumption, the change of economic structure and international competition, and so on. Knowledge innovation and economic institutional innovation is the origin of the driving force. There are many different routes and models in second economic modernization and the model is changing in different stages, such as information economy model, ecological economy model, bio-economy model and experience economy model etc. 

(3) Comprehensive economic modernization theory.  

It is a basic path of general economic modernization in the 21st century. It is a process to catch up and reach the world advanced level of the economy for the development countries, which includes the development of new industrialization, knowledgization, greening and globalization, and the transformation from new industrialization to knowledgization, from agricultural to industrial and knowledge economy, continuous increase of productivity and national income, the improvement of economic welfare and equity, as well as the economic competitive status in the world.  

Comprehensive economic modernization needs to coordinate in advancing the first and second economic modernization, paying equal attention to new industrialization and informatizaton, de-industialization and knowledgization and greening etc.  

III.  Strategic choice for China¡¯s economic modernization 

In the past 300 years of economic modernization, what had changed were not only the content of world¡¯s economy, but also the distribution of fortune. 300 years ago, just before world¡¯s economic modernization, China was still the world¡¯s fortune center, perhaps one of world¡¯s economy centers, the other was the emerging Europe. When industrial revolution was changing Europe¡¯s economy, China was still dwelling on the dream of ¡°powerful country¡±. The 300 years of world¡¯s economic modernization is the success and prosperity of Europe and North America, and the period of declining and reviving of China¡¯s economy. During the last 20 years of the 20th century, China¡¯s economy began to increase continuously, which was outstanding in the world. Though the increase rate of China¡¯s GNP per capita was high, there was still great gap from the world¡¯s advanced level and the gap was being enlarged, just because China¡¯s GNP per capita was very small in the past, and the increase value per year was still small. 

To realize modernization is our unalterable target. According to the ¡°Three step¡± strategy advanced by Deng xiaoping, in 2050s, we will reach the level of moderate developed countries. At the end of 21st century, we will reach the level of developed country. To realize modernization in the 21st century, we must realize economic modernization. And to realize economic modernization, to reach the world¡¯s advanced level, we should carry out more research on economic strategy. In our opinion, the canal strategy coordinating the first and second economic modernization can be considered. Using this strategy, we anticipate our country¡¯s economy modernization will enter the top 40 countries in the world in 2050, and enter the top 10 countries at the end of the 21st century. 

(1) Opportunity and Challenge 

During the first 50 years in the 21st century, China¡¯s economic modernization will face many opportunities, such as:(1) Opportunity from economic informatization and globalization. (2) Opportunity from bio-economy and ecological economy. (3) Opportunity from experience economy and cultural economy.  

There are a lot of challenges, such as: (1) Continuous and rapid increase of productivity. (2) Change from tripartite economy to knowledge economy. (3) Agricultural modernization. (4) Continuous supply of resources and energy as well as maintenance of finance stability. (5) Ecological modernization, coordinate of ecology and economy. (6) Harmonious development of regions. (7) Balance the urban and rural area. (8) Improvement of the labor quality. (9) Improvement of national innovation ability and efficiency. (10) Attendance of globalization and maintenance of country¡¯s interests. 

(2) Quantification of the target and road 

About strategy of China¡¯s economic modernization in the 21st century, there are different opinions. From the point of modernization research, economic canal strategy and roadmap of China¡¯s economic modernization can be a reference for making the economic modernization strategy.

Roadmap of China¡¯s economic modernization is an integration of canal strategy and road, which includes canal strategy, basic objective, basic mission, monitoring indicators, economic quality and structure monitoring etc. 

l         The canal strategy: To adopt the comprehensive economic modernization theory, to coordinate and accelerate the first and second economic modernization, new-industrialization, knowledgization, greening and globalization, and to accelerate the transformation from new-industrialization to knowledgeablization, from first to second economic modernization, and finally accomplish second economic modernization, reach the advanced level of world¡¯s economic modernization. 

The economic canal strategy demands the coordinative development of industrialization and agricultural modernization, environment protection, informatization, globalization, high tech and appropriate tech industries, industrialization and de-industrialization, and take the high-quality, greening new-industrialization road to realize the transformation from industrialization to knowledgization, from industrial economy to knowledge economy. 

l         The quantitative objective of China¡¯s economic modernization: To complete first economic modernization, reach the moderate level of world¡¯s economic modernization and enter the top 40 countries in the world¡¯s economy before 2050. During the latter 50 years of the 21st century, to complete second economic modernization, reach the developed level of world¡¯s economic modernization, and enter the top 10 countries in the world¡¯s economy. 

l         Tasks to finish the quantified objectives: The international level of China¡¯s economic modernization should go up 3 steps, the historical process should go through 6 stages, and the rank of China¡¯s economic modernization in the world will advance 60 positions.    

In the details, about the level, China should upgrade from the less developed country to the primary developed country in economy around 2020, the moderate developed country around 2050, the developed country around 2080, and leap into the frontier ranks of the developed country before 2100.  

The historical process of China¡¯s economic modernization will enter the mature period of first economic modernization about 2020, the transition period of first economic modernization about 2030, the start-up period of second economic modernization in 2040, the developing period of second economic modernization in 2050, the mature period of second economic modernization about 2080, and enter the transition period of second economic modernization about 2090.  

The rank of China¡¯s economic modernization in the world should advance about 30 positions before 2050s, and about 30 positions in the latter 50 years of 21st century. 

l         Economic quality and structure monitoring. The economic quality monitoring includes 3 groups: economic efficiency, economic progress and economic infrastructure. The economic structure monitoring includes 3 groups: change of economic structure, circulation and distribution structure, as well as coordinative development of economy. There are 6 indicators in each of the groups, totally 36 indicators. Before the 2050, these indicators in China should reach the level of moderate developed country in the world. 

(3) Suggestion on accelerating China¡¯s economic modernization 

In the first 50 years of 21st century, there are three bottlenecks, which are economic quality, economic structure and international economic competitive power. In our idea, China¡¯s economy should focus on economic quality and structure, especially economic quality, at the same time improve the international competitive power greatly. 

To accelerate China¡¯s economic modernization, we advance ten suggestions for discussion: 

 (1) To develop roadmap of economic modernization for our country and different regions.

 (2) To focus on economic quality, realizing two strategic changes of the economic development model and improving labor quality completely before 2050.

(3) To complete new-industrialization and informatization, realizing the 6 changes of industrialization pattern before 2030.

(4) To complete modernization of economic infrastructure before 2030.

(5) Advance the strategic changes of our economic structure, complete the reform of the industrial structure and the ten industries.

(6) Advance the regulation of circulation, consumption and distribution system continuously, and improve the fairness of the income distribution.

(7) To control and reduce the economic imbalance, and improve the economic coordination.

(8) To enhance the macro-basis of the international economic competition. We proposed to edit the state economic law codes, constitute Information Transparency Act, and establish evaluation center of state economic policy and state small business service agency etc.

(9) To cultivate the micro-basis of the international economic competition. We do need to cultivate and improve company¡¯s international competitive power, carry out theory study of international economic competition, and train millions of enterpriser in 5 years.

(10) Improve international competitive environment for Chinese corporation. 

IV.  The 50 years of economic modernization 

The former analysis is based on single indicator, which can¡¯t state economic modernization completely. To grasp the whole trends and reality, we should assess world¡¯s economic modernization. So we constitute the economic modernization model, including the assessment of first economic modernization, second economic modernization and comprehensive economic modernization, the assessment result is ¡°economic modernization index¡±. 

1.  The 50 years of economic modernization in the world 

(1) The level of world¡¯s economic modernization in 2002 

We have assessed 131 countries in 2002, and found that there were 24 countries finished first economic modernization, accounting for about 18% of the all samples, and 18 countries entered the period of second economic modernization, about 14% of the all.  

According to second economic modernization index, there were 18 economic developed countries, 9 economic moderate-developed countries, 24 economic primary developed countries and 79 economic less developed countries. 

According to second economic modernization index in 2002, the first 10 countries were the United State, Switzerland, Norway, Denmark, Sweden, Netherlands, Japan, French, England and Belgium. Among them, the first 8 countries¡¯ index had exceed 100, and 6 countries had entered the stage of second economic modernization, which are America, Netherlands, French, England and Australia. These countries represented the frontier level of world¡¯s economic modernization. 

(2) Main features of world¡¯s economic modernization in the past 50 years. 

During the last 50 years of the 20th century, the direction of world¡¯s economic modernization had changed greatly, such as the transformation from industrialization to de-industrialization in developed countries, and the number of country finished first economic modernization increased from 1 to 24, and the number of country entered the period of second economic modernization increased from 0 to 18. 

In the past 50 years, performance of economic modernization of different country was greatly different in the world. From 1950 to 2002, 21 countries had upgraded such as Japan, and 6 countries had downgraded such as Venezuela. From 1960 to 2002, there were 15 countries whose economic status had upgraded and 5 countries downgraded. Therein, Japan, Singapore and Korea¡¯s status had gone up 2 steps. 

In the past 30 years, growth rate of economic modernization were greatly different in the world, international gap of economic modernization was widening. From 1970 to 2002, 36 countries¡¯ first economic modernization index decreased, such as Argentina, and 10 countries¡¯ second economic modernization index decreased, such as Zambia. If maintaining the average annual growth rate of the period from 1970 to 2002, it will take about 85 years to complete first economic modernization for the medium-income countries, about 53 years for the world averagely.  

2.  The 50 years of China¡¯s economic modernization 

(1) Features of China¡¯s economic modernization during the last 50 years 

From 1950 to 2002, China¡¯s first economic modernization index had increased from 7 to 22, and the rank had risen from 75th in 1960 to 64th in 2002 in the world, economic modernization had shifted from traditional agricultural economy to the developing period of first economic modernization. From 1970 to 2002, China¡¯s comprehensive economic modernization index had increased from 12 to 16, and the rank in the world had risen from 92nd to 69th. 

In the past 50 years, there is an interruption from 1960 to 1980. During this period, China¡¯s first economic modernization index had decreased and the rank downgraded. From 1980 to 1990 China¡¯s economic modernization began to recover, and after 1990 it began to increase rapidly.

 (2) China¡¯s economic modernization in 2002 

China belonged to less developed countries in 2002, the gap between China and the world¡¯s advanced level was great. China¡¯s first economic modernization index was about 22 in 2002, ranking the 64th among 108 countries in the world; the second economic modernization index was 17, ranking the 68th ; and the comprehensive economic modernization index was 16, ranking the 69th . In 2002, Chinese economy was in the developing period of first economic modernization, just as the middle of industrialization, and the economic modernization level was below the world¡¯s average. 

If keep the average annual growth rate of first economic modernization index between 1990 and 2002, it will take about 28 years (before 2030) to complete China¡¯s first economic modernization. If keep the average growth rate between 1980 and 2002, it will take about 47 years to complete China¡¯s first economic modernization.  

(3) China¡¯s regional economic modernization in 2002 

In 2002, China¡¯s Hong Kong, Macao and Taiwan had completed first economic modernization, Hong Kong and Macao had entered the period of second economic modernization, and Hong Kong was developed level in economy, Macao and Taiwan was moderate-developed in economy, Beijing and Shanghai was primary developed and others were less developed. 

In 2002, excluding Hong Kong, Macao, Taiwan, Beijing, Tianjin and Shanghai, the provinces whose first economic modernization indexes were in the first 10 regions were Zhejiang, Jiangsu, Guangdong, Liaoning, Fujian, Shandong, Heilongjiang, Hebei, Hubei and Jilin; and the provinces whose comprehensive economic modernization index is in the first 5 regions were Guangdong, Zhejiang, Fujian, Jiangsu and Liaoning. Zhejiang, Guangdong, Jiangsu, Fujian and Liaoning are relatively developed regions, located in east coast. 

In 2002, the average gap between our 34 provinces and the world¡¯s advanced level: average gap of first economic modernization index was 69; average gap of comprehensive economic modernization index was 75. 

V. The global modernization index in 2002 

Our issue has complete the assessment of world¡¯s and China¡¯s modernization in 2002. There were 68 countries had finished or had almost completed the first modernization, and among them, 23 countries had entered the second modernization, 1n 2002. 

In 2002, China was still a primary developed level country, the extent of the realization of first modernization is 82%, ranking the 60th among the 108 countries in the world. The second modernization index was 32, ranking the 56th in the world.  

In 2003, the extent of the realization of China¡¯s first modernization was 82%. Excluding Beijing, Tianjin, Shanghai, Hong Kong, Macao and Taiwan, the provinces whose realization of first modernization were in the first 10 regions were: Zhejiang, Liaoning, Jiangsu, Guangdong, Heilongjiang, Hubei, Chongqing, Jilin, Fujian and Shandong.

 

Study Task Team on China¡¯s modernization strategy

China Center for Modernization Research, Chinese Academy of Sciences

May 19, 2005