The Development of BRIC and the Large Country Advantage

205 Pages·2016·2.64 MB·English

by  Yao Ouyang (auth.)

Yao Ouyang
The Development
of BRIC and the
Large Country
Advantage
The Development of BRIC and the Large Country
Advantage
Yao Ouyang
The Development of BRIC
and the Large Country
Advantage
123
Yao Ouyang
BigCountryEconomy Research Center
Hunan University of Commerce
Changsha,Hunan
China
ISBN978-981-10-0632-6 ISBN978-981-10-0633-3 (eBook)
DOI 10.1007/978-981-10-0633-3
JointlypublishedwithTruthandWisdomPress
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Foreword of Publication
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The “Contemporary Economics Series” is a large and comprehensive series
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This series aims at the modernization and international standardization of eco-
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v
Foreword
This book puts forward questions from the perspective of the reasons of China’s
economicmiracleandtheriseofBRIC,developstheconceptoftheComprehensive
Advantages of Large Country (CAOLC), reveals the formation mechanism of the
CAOLC, proposes an analytical framework of the CAOLC, analyzes the charac-
teristics of economic development mode of Large Country and the strategic
direction of economic development based on CAOLC, and builds the theory
embryo of the CAOLC.
By “comprehensive advantages of Large Country,” we refer to some special
advantages stemming from the characteristic of “Large Country” itself and its
“diversification,”andtheyarestemmingfromthecombinationofvariousfavorable
resourcesofLargeCountries.Theprincipleof“comprehensiveadvantagesofLarge
Country” enables us go beyond the debate between comparative advantage and
competitive advantage, thereby examining the economic development advantages
of Large Countries in broader areas from a systematic perspective.
Inthisbook,“comprehensiveadvantagesofLargeCountry”ismainlyreferredto
the facts of China, India, United States, Russia, and Brazil, and firstly is based on
the national conditions of China. China’s ranking in the world in terms of com-
prehensive international competitiveness has been “rising with shocks,” what kind
ofadvantagesallowChinapossesssuchcompetence?Clearlytheanswerisnotonly
labor resources advantage, and more importantly, it should be “Large Country”
advantage and “transformation” advantage: China is a Large Country with unbal-
ancedeconomicandtechnologicaldevelopment,someregionsandsectorshavethe
advantages of low-cost labor resources and application technologies, while others
possess the advantages of high-tech and high capital-intensive industries; China is
experiencingatransitionaleconomy,inwhichsomeregionsandsectorshavesome
advantagesofdevelopingcountries,whileothershavetheadvantagesofdeveloped
countries. All these different advantages can be positive factors to enhance the
economic competitiveness of China, and therefore should be integrated into the
source and power system of China’s economic development.
vii
viii Foreword
In the study of “comprehensive advantages of Large Country” from the per-
spective of the general principle of Large Country’s economic development, a
“Magic Gourd Model” is developed to describe the main path of “comprehensive
advantages of Large Country” formation in countries with Large Country charac-
teristics. Specifically, they include many aspects: the advantage of deepening
division of labor, cost-reducing advantages and pillar industries advantages stem-
medfromeconomyofscale;thesynergyadvantageofregionaleconomy,industries
and products originated from economic differences, the adaptive advantage in
human capital, technology adaptation, and product suitability resulted from eco-
nomic diversity, and the stability advantage in industries, products, and employ-
ment resulted from the economic integrity. The “comprehensive advantages of
LargeCountry”mainlyembodyintheadvantageofscaleanddeepeningdivisionof
labor, the advantage of diversity and complementarity, the advantage of hetero-
geneity and adaptability, and the advantage of independence and stability because
of the “big” scale of a country.
The economic growthfactors ofLargeCountriesmainly includenaturalresour-
ces, financial capital, human capital, technological progress, market potential, and
foreign trade.Allthesefactorscanbeusedtodescribe theanalytical frameworkof
“comprehensive advantages of Large Country” in the sense that these factors in
Large Countries are characterized by large scale, differences, heterogeneity and
diversity, and they create advantages of scale and adaptability. However, why has
Chinese economy with Large Country characteristics experienced periods of eco-
nomicdepression?Oneoftheimportantconstraintsofeconomicdevelopmentisthe
institution; old and rigid institution hindered China’s economic growth, leading to
thefailureofthetransformationfrompotential“comprehensiveadvantagesofLarge
Country” to the real advantage. Reform and opening up and institutional transfor-
mation invigoratedtheChinese economyandacceleratedeconomical development
of China. Institutional innovation exerts important influence on the formation of
comprehensiveadvantagesofLargeCountryandtheoptimizationofvariousfactors
such as natural resources, human capital, financial capital, technological progress,
marketpotential,andforeigntrade,forminganenvironmentconducivetoeconomic
aggregate and a suitable economic aggregate pattern, to provide motive force to
economic aggregate and transformation. The successful experiences of reform and
opening up in China are as following: adhering to institutional innovation with
cultivatingthe market mechanism as themain line, tobuilda socialist marketeco-
nomic system, so that economic growth factors have been optimized and allocated
rationally;adheringtothe gradual reformpath, so that institutionalinnovation ina
LargeCountrymadeprogresssteadily;persistinginthecombinationofreformand
openingup,sothatabigeconomycantakefulladvantageofdomesticmarketand
internationalmarket,todriveeconomicgrowthwithbothdomesticandinternational
demands; adhering to transformation of economic growth by phase, so that a big
economycouldutilizelatecomeradvantageandfirstmoveradvantage,achievingthe
transformationandupgradeofindustrialstructure;andadheringtothedevelopment
of appropriate technology and high-tech and the combination of imitative and
self-dependentinnovations,todevelopvariousfactorsbytechnologicalprogress.
Foreword ix
TheeconomicdevelopmentmodeofaLargeCountryhasitsownparticularities,
for which appropriate strategic direction should be set. For example, according to
the economy scale of a Large Country, industry development should follow the
strategyofoveralladvancement;accordingtoeconomicdevelopmentdifferencesof
aLargeCountry,regionaldevelopmentshouldfollowthecoordinateddevelopment
strategy; according to the endogenous economy characteristic of a Large Country,
both internal and external cyclic development strategy should be taken in the
opening-up; and according to the independent economy characteristic of a Large
Country, a proactive strategy should be adopted for economic development. The
suitability of comparative advantage strategy should be investigated from the per-
spective of economic growth stage. Comparative advantage strategy is applicable
mainly to the stage of quantity-oriented economic growth, instead of the stage of
quality-orientedeconomicgrowth.Duringthetransformationofgrowthpattern,the
comparative advantage strategy should be re-examined. Specifically, the charac-
teristics of China as a Large Country have made it possible to realize industrial
structure upgrading more effectively. Given the multiple characteristics of a Large
Country, the goals and strategy paths of different industries and technological
upgradeindifferentregionsshouldbedifferent,insteadofdefinitelystickingtothe
strategy of comparativeadvantage.At present, more in-depthdiscussionshouldbe
conducted in the selection of China’s economic development strategy. The devel-
opment strategy of China should reflect not only the huge effect of comparative
advantageoflaborresourcesonpromotingemploymentandeconomicgrowth,but
alsotheimportantroleofscienceandtechnologyinachievingbreakthroughsinthe
technology and knowledge intensive industries.
TherapidriseofBRICfurtherhighlightsthebigeconomyphenomena,andafter
thefinancialcrisistheworldeconomyseesthebackboneroleofU.S.aswellasthe
newlyrisingLargeCountries.BRICshouldbringintofullplaytheiradvantagesas
Large Countries, take an active part in establishing a new international financial
system, and promote the sustainable development of world economy. Facing the
huge impact caused by international financial crisis, China has taken positive
actionstotheresuscitationofglobaleconomy,byrightofitsadvantagesasaLarge
Country, through stimulating its domestic demand. In the post-crisis period, China
should strengthen these actions, adjust and optimize its industrial structure, and
improve the quality and effectiveness of its economic development, displaying a
fully new figure to the world.
Yao Ouyang
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Exploring Chinese Miracle . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rise of BRIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Research Schema and Theoretical Contributions . . . . . . . . . . . . 5
1.3.1 Objects of Research. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.3.2 Contents of Research. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3.3 Research Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.3.4 Theoretical Contributions . . . . . . . . . . . . . . . . . . . . . . . 9
2 Related Literatures on Large Country Economy. . . . . . . . . . . . . . 11
2.1 The Evolution of Foreign Literature. . . . . . . . . . . . . . . . . . . . . 11
2.1.1 Theoretical Origin. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.2 Pattern of Large Countries . . . . . . . . . . . . . . . . . . . . . . 12
2.1.3 Characteristics of Large Countries. . . . . . . . . . . . . . . . . 14
2.1.4 Rise and Fall of Large Countries. . . . . . . . . . . . . . . . . . 16
2.2 Views of Domestic Scholars. . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2.1 Views of Large Country Economy. . . . . . . . . . . . . . . . . 18
2.2.2 Characteristics and Advantages of Large Country
Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2.3 Patterns and Strategies of Large Country Economy . . . . . 20
2.2.4 Comparative Study of Large Country Economies. . . . . . . 22
2.2.5 The Large Country Economy Strategy of China . . . . . . . 24
2.3 Summary and Reviews. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3 Concept: Comprehensive Advantages of Large Countries
(CAOLC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.1 Definition of Large Country . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.1.1 The Concept of Large Country . . . . . . . . . . . . . . . . . . . 31
3.1.2 Comprehensive Evaluation Index System for Large
Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
xi
xii Contents
3.2 Large Country Effect on Economic Growth. . . . . . . . . . . . . . . . 37
3.2.1 Basic Characteristics of Large Countries. . . . . . . . . . . . . 37
3.2.2 Large Country Effect on Economic Growth in BRIC. . . . 39
3.3 Interpretation of Comprehensive Advantages of Large
Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.3.1 Basis for “Comprehensive Advantages of Large
Country” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.3.2 Industrial Competitiveness Based on Comprehensive
Advantages of Large Countries. . . . . . . . . . . . . . . . . . . 48
3.3.3 Enterprise Competitiveness Based on Comprehensive
Advantages of Large Country. . . . . . . . . . . . . . . . . . . . 51
3.3.4 Foreign Trade Competitiveness Based on
Comprehensive Advantages of Large Country. . . . . . . . . 53
4 Model: Analysis of Formation Mechanism . . . . . . . . . . . . . . . . . . 57
4.1 Magic Gourd Hypothesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.2 Formation of Comprehensive Advantages of Large Countries . . . 60
4.3 Mechanism to Convert Comprehensive Advantages of Large
Country into Competitive Advantages . . . . . . . . . . . . . . . . . . . 63
4.4 Mechanism of Comprehensive Advantages of Large Country
Promoting Industrial Structure Upgrading. . . . . . . . . . . . . . . . . 66
5 Framework: Factor Structure Analysis. . . . . . . . . . . . . . . . . . . . . 73
5.1 Determinants of a Large Country’s Economic Growth . . . . . . . . 73
5.2 Analysis Framework of Comprehensive Advantages of Large
Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
5.2.1 Advantages in Natural Resources . . . . . . . . . . . . . . . . . 76
5.2.2 Advantage of Financial Capital. . . . . . . . . . . . . . . . . . . 77
5.2.3 Advantage of Human Capital . . . . . . . . . . . . . . . . . . . . 78
5.2.4 Advantage in Technological Progress. . . . . . . . . . . . . . . 79
5.2.5 Advantages of Market Potentials. . . . . . . . . . . . . . . . . . 80
5.2.6 Advantage in Foreign Trade. . . . . . . . . . . . . . . . . . . . . 81
5.3 Institutional Innovation and Economic Growth in Large
Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
5.3.1 Institutional Innovation Pushes Forward Economic
and Social Development. . . . . . . . . . . . . . . . . . . . . . . . 83
5.3.2 Reform and Opening up and Rapid Sustained
Economic Growth in China . . . . . . . . . . . . . . . . . . . . . 84
6 Strategy: Economic Development Pattern of Large Countries . . . . 89
6.1 Characteristics of Economic Models of Large Countries. . . . . . . 89
6.2 Suitability of Comparative Advantage Strategy
and the Staged Economic Growth of Large Countries. . . . . . . . . 94
6.2.1 Comparative Advantage Strategy Theory
and the Questioning on It. . . . . . . . . . . . . . . . . . . . . . . 94