The Determinant of Economic Growth in Emerging Markets: Case Study of China

MSc BUSINESS ECONOMIC AND FINANCE

Title of Project

The determinant of economic growth in emerging markets: A case study of China.

Tarik TOUAT

Student ID: 10034757

August 2011

Project Supervisor: Dr. Helen Solomon.

Abstract

China has enjoyed a very rapid economic growth over the past decades. The impressive growth was driven by several factors. This study aims to determine those factors which contributed to unprecedented economic growth of China and show the relationship with the economic growth by an empirically investigation.

The Ordinary Least Squares (OLS) method is applied in order to estimate a growth model using a time series data from 1984 to 2009. The results shows that trade openness, government size and inflation have a significant effect on economic growth. On the other hand, foreign direct investments, the level of human capital and return on investment have minor impact on economic growth in China. The relationship is established though the vector error correction model (VECM), the finding is that trade openness, government size and inflation had a positive impact on gross domestic product of China in the long-run.

Word account: 13.112 words.

Acknowledgements

Allow me to pay tribute to my supervisor, Dr. Solomon for kindly supervising this study and giving her time and her knowledge to the success of this project.

I take this opportunity to thanks my elder brother Arezki TOUAT who was a model of success and constant source of motivation; I’m here to express my sincere gratitude and I wish him all the best for his wedding day.

Dedication

I dedicated this work to my parents Mouloud and Saliha TOUAT, who have contributed in an extraordinary way to my studies. To my younger sister Louiza TOUAT who is very special for me.

Table of Contents

1 INTRODUCTION 6 1.1 Main objective 7 1.2 Organization of the study 7
2 OVERVIEW OF THE CHINESE ECONOMY 8 2.1 Geopolitical characteristics of China 9

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