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Empirical research on the determinants of regional economic development typically neglects the influence of culture. This study fills that gap by attempting to establish a causal linkage between culture and economic development in the Chinese context. Our empirical analyses are based on a comprehensive economic statistics of China's provinces and prefectures during 1978 to 2008. We use Protestantism as a proxy for culture because Protestant ethic has been linked to the spirit of capitalism and commercial culture in Weber's famous work. To isolate the exogenous variation in culture measure, historical Protestant dissemination is employed as instruments. The estimation results suggest that Christian commercial culture has a significantly positive impact on economic performance - per capita GDP after other important influences (i.e., capital, population, human resources, institutional quality, trade, infrastructure, geography, etc.) are controlled for. We also find heterogeneous effects of culture on economic development in different regions of China. [ABSTRACT FROM AUTHOR]

China's economic development has been miraculous since the transition from a planned economy to a market economy in 1979. This article provides answers to six related questions: Why was it possible for China to achieve such extraordinary performance during its transition? Why was China unable to attain similar success before its transition started? Why did most other transition economies fail to achieve a similar performance? What costs does China pay for its extraordinary success? Can China maintain dynamic growth in the coming decades? What should other developing countries do to achieve similar success? [ABSTRACT FROM AUTHOR]

The article discusses the global economy, which the article asserts is suffering from serious imbalances characterised by a deterioration of the U.S. current account deficit, rapid increases in oil and raw material prices, and excessive international liquidity. The article compares these issues with the rapidly growing Chinese economy, which is suffering from serious imbalances of another kind, characterised by rapid increases in the so-called "twin surpluses" (current account and capital account surpluses), persistence of excessive investment, acute energy shortages, deterioration of the environment, and the rapid widening of income gaps. Programs adopted by the Chinese government aimed at achieving a more balanced and sustainable growth pattern are discussed.