If we examine the structure of the Chinese economy on the eve of reform, we can see that at the same time it is both ‘over-industrialized’ and ‘under-urbanized’ compared to economies with similar levels of income. When Deng Xiaoping first unleashed the dynamic forces that would transform China into a major economic power in 1979, China’s per capita GDP, as estimated by the World Bank, was roughly equivalent to 675 USD (measured in constant year 2000 ppp US-dollar equivalents.) Which was a relatively unremarkable figure for a low-income developing nation at that time.
However, according to price data from the time, some 44 percent of China’s GDP was accounted for by industrial production, a figure far higher than comparable low-income countries. Moreover, China’s energy consumption per dollar of GDP was several times that of equivalent low-income countries leading to the conclusion that China was ‘over-industrialized’ for a nation with such a low level of GDP.
However, paradoxically, at the same time, China’s urbanization rate was only 18 percent. Far lower than comparable nations leading to the conclusion that China was ‘under-urbanized’ for its GDP level. Additionally, literacy and life expectancy far outstripped other developing nations at the time.
It is possible to square some of these data, like life expectancy and energy consumption, by adjusting GDP upward by assuming the Yuan was undervalued at the time, but this only serves to make the urbanization rate even more anomalous. Added to this, China actually began devaluing the Yuan as it entered its period of reform and opening up. To which one can only conclude that China was an economic paradox, before it was an economic power house.
