China emerged as the world’s second-largest economy by registering exceptional growth in the last four decades, but at the cost of widespread corruption, environmental degradation, food safety issues, and income disparities.
Professor Justin Yifu Lin, formerly Senior Vice President and Chief Economist of the World Bank, 2008–2012, explained in an analysis the institutional price China paid for its economic success, as reported by the Financial Post. In 2018, China celebrated the 40th anniversary of its transition from a planned economy to a market economy. And it was an astounding success. In 1978, the country was closed and suspended from the world. It was a poor country, if not among the world’s poorest.
Its per capita was less than a third of even sub-Saharan African nations. Over 80% of its people lived in rural areas, with many living below the international poverty line, and China had a closed economy with trade accounting for less than 10% of its GDP.
But in the last 40 years, the annual GDP growth rate was 9.4% on average, and trade grew at an average rate of 14.8%. In no time, China was the world’s second-largest economy.