Deepening Reform for China’s Long-term Growth and Development by Ligang Song

Part I: New Model for 
Economic Growth

1. Reform and China’s 
Long-Term Growth 
and Development 
Ross Garnaut, Ligang Song and Cai Fang
 Introduction
 Reforms to build China’s new model of economic growth have gained 
momentum since our mid 2013 book, China: A New Model for Growth and 
Development. This year’s China Update book explores more deeply the new model 
of growth, through which China seeks to achieve the transition from a middle
income to an advanced economy. This book defines and discusses the reforms 
that are necessary to bring the new model into reality and to make it work. 
It describes many barriers that stand in the path to success, and the damaging 
consequences of failing to cross the barriers smoothly. It identifies opportunities 
for China to reconcile structural change with maintenance of strong growth in 
living standards. 
In late 2013, a plenary meeting of the Chinese Communist Party’s Central 
Committee authorised far-reaching extension of market-oriented reform. 
Premier Li Keqiang’s Work Report to the National People’s Congress in early 
2014 outlined policies to deepen markets for capital, labour, goods and services 
and to accelerate progress towards the ultimate objectives of the new model: 
increasing the consumption and services shares of the economy; raising the 
relative incomes of poorer Chinese and especially rural residents and unskilled 
urban workers; and reducing the damage to the local and global natural 
environments from Chinese economic growth.
 The old uninhibited investment expansion of the mid 1980s to 2011 moved 
China swiftly from a low-income country into the ranks of the middle-income 
economies. Whereas most Chinese in 1978 experienced material deprivation—
 living standards that placed most people in the poorer half of humanity—by 
2011 a large majority was comfortably separated from shortages of the basic 
necessities of life and was enjoying more and more of the higher fruits of modern 
economic growth. 
At the same time, a high proportion of the increase in incomes from rapid 
expansion of output within the old growth model was reinvested in new 
increments of investment-led growth. Large movements of workers from the 

Deepening Reform for China’s Long-term Growth and Development by Ligang Song