Dynamics of the Rate of Surplus Value and the "New Normal" of the Chinese Economy

Abstract

This paper builds homogenous series of the rate of surplus value for the Chinese economy over the extended period 1956-2014 with a Marxian approach. It finds that the high profitability that stimulated capital accumulation in the decade before the 2008 crisis had relied on the continuous growth in the rate of surplus value. Given that the global crisis and changes in the domestic economy undermine all the conditions maintaining the accumulation model (an expanding external market, a relatively large reserve army of labor, and a low debt-income ratio), the rate of surplus value has failed to increase and profitability declined since 2008. Thus this paper interprets the so-called “new normal” of the Chinese economy as a stage of declining profitability that results mainly from the stagnant rate of surplus value and the rising value composition of capital.