Human Development Index of China and Economic Growth: Hindsight and Global Perspective

Abstract

Currently, it becomes important to examine the role of human capital in the context of China’s economic development and its impact on the world economy. The paper reconstructs a realistic Human Development Index (HDI) and corresponding dimensional indices of the People’s Republic of China (PRC) and its provinces for 1990–2020. The obtained indices were compared with those of the major countries of the world or countries similar to Chinese provinces, revealing that China underestimates its HDI, according to the United Nations Development Programme data. To analyse the role of human capital in economic growth of the world, China, and a group of countries similar in population size and HDI to Chinese provinces, a constructed model combined human capital with education quality and physical capital. The findings show that the PRC overcame negative conditions affecting its ability to grow rapidly. It took China just 30 years to reach the same level of HDI that other countries achieved in 40 years. Additionally, inequalities in HDI of Chinese provinces were significantly reduced. By 2025, 90 % of the PRC’s population is expected to reach a very high level of human development, thus completing the transformation from a developing to a so-called developed country. Educational human capital explains almost three-quarters of economic growth variation in the long run, while the average duration of education will continue to influence economic growth in the next 10–30 years. Considering demographic, institutional, and technological effects, as well as the objectives of the 14th Five-Year Plan, an increase in the duration and quality of education in China is predicted. The paper demonstrates that PRC’s recent economic growth is due to an increase in both physical and human capital.