Among the Han Chinese people, both across regions and over time, growth is inversely correlated with statist policies.

Statist policies in China

by Scott Sumner

I frequently read commentary on the Chinese economy. Often we are informed that the Chinese growth "miracle" was produced by a wise policy of rejecting laissez-faire and having the government direct much of the economy. The logic seems to run roughly as follows:

1. China has been growing very fast.
2. The Chinese government plays a large role in the economy.
3. Therefore Chinese growth is explained by statist policies.

I would hope I don't need to explain what's wrong with that logic, but just in case let's look at the Economist magazine list of the 10 fastest growing economies for 2015:

OK, so how should we test the effect of statist policies on an economy? One method would be to compare the economic performance of highly statist economies like Greece with more laissez-faire economies like Switzerland. The problem here is that economic performance can vary for many reasons, such as cultural differences, natural resource endowments, etc. To the greatest extent possible, you'd like to compare different economic systems in culturally similar regions. Here are three possibilities:

1. Different countries with Chinese culture.
2. Different time periods within China.
3. Different regions within China (especially "Han" China.)

It's pretty well known that the other three ethnic Chinese economies (Hong Kong, Singapore and Taiwan) are all far less statist than Mainland China, and far richer.

It's pretty well known that China began growing fast after it started moving away from communism, and that further growth spurts followed the liberalization around 1992, and the liberalization around the time China joined the WTO in the early 2000s.

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