Lin

China's economy has undergone rapid growth over the last three decades, and studying the nation's rise can provide insight into alleviating poverty around the world, said Justin Yifu Lin, chief economist and senior vice president of the World Bank. He spoke to a crowded auditorium Feb. 20 in Uris Hall.

Lin pointed out that prior to 1978, China was primarily an agrarian economy with a population steeped in poverty. By the end of 1978, China began an economic transition under the leadership of Deng Xiaoping, who introduced reforms that allowed the nation's economy to grow into the second largest in the world.

The Chinese economy's annual growth rate from 1979 to 2010 was 9.9 percent per year, he said, which was a "miracle," because such a rate of growth had never been observed in human history.

The secret to China's success was harnessing the "advantage of backwardness," said Lin. In developmental economic theory, the advantage of backwardness means that countries with high poverty levels should see more annual economic growth.

Why did China only see economic growth after 1979, when China had the advantage of backwardness for many years?

According to Lin, the answer lies in the contrast between the economic strategies China adopted before and after 1978. Before the 1950s, there was civil war and political unrest in China, so it was impossible for economic development to occur. Then Mao Zedong came into power in 1949 and wanted China's economy to overtake affluent western economies.

Mao wanted China to develop high-tech industries immediately, and from 1953 onward, China started to pursue these strategies. The trouble was that these high-tech industries were primarily located in western nations and their products were under patent protection. China would either have to pay high licensing fees to use these new technologies or "reinvent the wheel," said Lin.

Additionally, these new industries were capital intensive. China was a poor agrarian society whose economy relied on government protection and subsidies, which created all kinds of shortages and was very inefficient, Lin explained.

Only after 1979 did China tap into the advantage of backwardness, said Lin. One of its major economic strategies was to develop labor-intensive sectors that didn't require a lot of capital, which was consistent with China's competitive advantages. These new strategies proved to be extremely successful and were partially responsible for China's global economic rise.

Lin said that he is optimistic that China's economy will continue to grow well into the future, predicting an annual growth rate of 8 percent for the next 20 years.

As the World Bank's chief economist, Lin hopes to apply lessons learned from China's rapid economic growth to alleviating poverty in developing nations around the world. He recommended that poor countries develop their economies according to their comparative advantages so that they too can achieve economic growth and stability.

"I think that maybe one day, all the countries in the world can achieve the same income status and enjoy prosperity," said Lin. "It's not a dream too far away."

Lin's talk was the second of a six-part lecture series on the rise of China, sponsored by the Cornell Program on Ethics and Public Life.

Farhan Nuruzzaman '12 is a writer intern for the Cornell Chronicle.