In this paper, we discuss the process of financialisation of developing countries and emerging economies (DEEs) from the perspective of critical realism (CR). We argue that the emergence of financialisation depends on the inherent tendency of the imbalance between the accumulation of productive and financial capital being actualised, and emphasise how government’s intentional actions under current social structures relate to this process. We use China as a case study to illustrate how DEEs can resist financialisation and maintain productive accumulation during development. We elaborate on various institutional and policy adjustments undertaken by China during different phases that promoted productive accumulation and how China avoided financialisation for much of its growth period. Our discussion helps to explain why China’s limited financialisation compared to other DEEs who experienced financialisation featured by dependency. We conclude by highlighting new potential risks and sources of financialisation faced by the Chinese economy.
Since the late 1990s, China's economic expansion has depended on an immense pool of cheap labor. Today, as wages increase and manufacturing operations leave the country, there are constant complaints about shortages of peasant workers. But has China really entered a new era of labor shortage?
We construct a framework for the interaction between economic system reform and the technological-economic system in order to analyze the dynamic process of China’s economic transformation and development. China has passed through three major phases of economic system reform, which have involved reforming the commodity economy through planning, establishing the socialist market economic system, and improving the socialist market economic system. Correspondingly, China has gone through three technological-economic systems, which may be summed up as: “quantitative subsistence consumption and extensive production without technological progress,” “qualitative subsistence consumption and extensive production with technological progress,” and “standardized mass consumption and mass production.” Since 2012, China’s economy has entered the era of a “new normal,” characterized by lower growth rates. This indicates a fundamental shift in the patterns of social demand away from the current technological-economic system that is growing incapable of sustaining rapid capital accumulation and thus needs transforming. To better explain China’s miracle, we focus on the ways in which the contradictions within each technological-economic system have evolved and have been resolved through targeted reforms to the economic system. Eventually, these reforms will lead to a new system that facilitates further capital accumulation.
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