The Falling Rate of Profit and the New Normal of Chinese Economy
Zhao Lei;Liu Hebei;
The declining rate of economic growth is the most significant feature of the new normal of Chinese economy. What factors lead to the declining rate of economic growth? The existing literature does not give a satisfactory answer. Starting from the Marxist political economics, this paper analyzes the relationship between economic crisis and the falling rate of profit, and then builds the three profitability indicators. We study the relationship beyween China's economic growth and the profit rate from 1998 to 2014, and find that the rapid rise of the organic composition of capital and the decline of the rate of surplus value lead to rapid decline of profit rate after 2007. In this process, the change of profit rate is highly consistent with the economic growth rate. So we can conclude that the falling rate of profit is the main cause behind the decline of China's economic growth. At the same time, after 2010 the high differentiation of Liaoning and Chongqing in economic growth is due to the intrinsic differences between their profit rates and the organic composition of capital. And the destruction of capital can reduce the organic composition of capital, improve the rate of profit, and thus restore the rate of economic growth.
【CateGory Index】： F124