- Michael Bell, Kalpana Kochhar, and Hoe Khor
- Published Date:
- June 1993
|1978–83||1984–88||1989–Present||Continuing and Possible Future Action|
|1. External Sector|
|Until 1981, several exchange rates were used for trade transactions between foreign trade corporations (FTCs) and domestic enterprises, depending on item traded.|
In January 1981, a single exchange rate was established for internal settlement of trade transactions (more depreciated than official rate).
|In 1984, exchange rate was unified.|
Dual exchange system reintroduced in 1986: official rate with de facto peg to U.S. dollar;
more flexible rate determined on foreign exchange adjustment centers (FEACs) at which retention quotas are traded;
FEAC premium was 53 percent at end-1987 and 80 percent at end-1988.
|Official rate devalued in December 1989 (21 percent) and in November 1990 (9 percent); from April 1991, more frequent small adjustments.|
By mid-1993 the real effective exchange rate (official) was 70 percent more depreciated than in 1980.
FEAC premium 17 percent at end-1989, falling gradually to 8 percent at end-1991. Subsequently, premium increased to about 80 percent in 1993 (reflecting market forces).
|Eventual unification of the exchange rates. No timetable specified.|
|Much experimentation with foreign exchange sharing. In 1984 arrangements between local and central governments were formalized. In 1985, some enterprises were given the right to retain a portion of foreign earnings.||Further evolution of complex quota retention system based on location by province and by priority industry. Access to FEACs: initially restricted to foreign-funded enterprises, but in 1988 access was extended to all domestic enterprises with foreign earnings or retention quotas.||System simplified in February 1991, with uniform retention except for mechanical and electrical products. Access gradually extended; by 1990 enterprises could acquire foreign currency for debt service. Individuals allowed to buy and sell at FEAC rates in 1991. Computerized trading introduced in national foreign exchange swap center in Beijing.||Retention and trading of actual foreign exchange to be considered. No timetable specified. Progressive extension of access to the FEACs and integration of trading in all FEACs.|
|Foreign trade originally conducted by 12 FTCs, each enjoying monopoly in a particular area, within mandatory trade plan. This system gradually replaced by decentralization, and diminishing role for trade plan. Experimentation with responsibility system for FTCs’ began.|
Subsidies on imports and exports.
|By mid-1 980s foreign trade largely conducted by about 700 FTCs mostly on an agency basis (FTC receives a fee for trading on behalf of domestic enterprises). In 1988, local branches of FTCs became independent and new ones established, bringing total number of FTCs to about 5,000.||Export subsidies abolished in 1991. Rationalization of FTCs begun in 1989 reduces number to about 4,000. By end-1991, over 400 production enterprises could trade directly. Responsibility system extended to all FTCs in 1991.|
|Trade licensing: both imports and exports covered by system introduced in 1980.||Number of licensed imports increased from 45 to 53 in 1988.||Exports subject to license steadily increased to 234 items in 1991. Proportion of trade covered by license (1991): exports—55 percent; imports—40 percent.||Plans announced in 1992 to end two-thirds of import restrictions by 1995, with 16 products removed in 1993.|
|Import tariffs progressively introduced.||Exports: number of licensed items reduced from 221 to 159 in 1988, Import tariffs range from 3–150 percent. Periodic adjustments to contain import demand.||Tariffs on 40 items reduced in 1991. Harmonized system effective 1992, with reduced duties on 225 items.|
|Experiments with responsibility system began in 1978. Household responsibility system (HRS) emerges as dominant form by 1983.||Mandatory procurement replaced in 1985 by contracts with households at negotiated prices.||Two-tier management system evolves in many localities: (1) continued HRS framework; and (2) centralized organizations (to provide better services). Some land reverts to the management of the collectives, which lease it out through bidding to maximize efficiency of utilization.||Further evolution with goal of maximizing efficiency of land use.|
|Prices and Subsidies|
|Procurement takes place in three tiers; contract (quota), negotiated, and market.||By 1987, market prices dominant at retail level except for some goods such as grain and oil supplied under urban ration.||Support-pricing machinery invoked to guarantee farm incomes in light of large grain harvest. Other prices increased (e.g., cotton).|
|Some agricultural inputs still supplied at plan or contract prices.|
Market prices apply to growing number of retail items; procurement prices increased; subsidies rise.
|Subsidies on essential foodstuffs continue to increase sharply.||Large adjustment in urban prices of rationed goods (grain and oil) in May 1991 and April 1992. Rationing abandoned in 1993. Gradual strengthening of wholesale markets at national, provincial, and local levels. Grain reserves established to preserve price stability.||National futures trading to be encouraged, to stimulate farmers’ supply direct to the market. Further reserves being established for price stability (e.g., in cotton, oils, sugar, wool, rubber).|
|Private interprovincial trade in grain permitted; diminishing role for production targeting.||To counteract stagnating grain output, some intervention increased: more procurement quotas, inputs tied to specified output, and state monopoly on foreign trade in grain. Grain imports required: national policy to achieve complete autarky.||Some increase in interprovincial barriers during rectification program. From late 1991 these measures reversed for some agricultural products. Strong production increases in 1990–91 (partly owing to good weather). (Record crop in 1990 of 446 million tons.)||Continued pursuit of complete autarky in grain production. Target of 500 million tons by 2000.|
|III. Pricing Policy|
|Selected SOEs sell a portion of output at negotiated prices on experimental basis.||Dual-track pricing introduced: (1) fixed prices corresponding to plan quotas; (2) guided prices in contracts with state purchasing agencies; (3) market prices for other sales.||Dual-track prices of a large number of commodities were unified, and energy prices adjusted repeatedly.|
Ratio of producer goods under fixed/guided/market pricing is down to 45:19:36 in 1991,
|Gradual phasing out of the remaining dual-track prices. Timetable not precisely specified.|
|Retail and Other Pricing|
|Retail prices of most important consumer goods remain under state control.|
Some adjustments in administered prices.
|Dual-track pricing introduced for many goods. In practice, three tiers of price control exist: state-fixed prices; state-guided prices; market prices (in subtiers): prior approval, guided prices, unrestricted.|
By 1988, the three tiers are roughly in the ratio 30:25:45. Greater market pricing paralleled by the rise of individual and collective retailing (from 10 percent in 1978 to 53 percent in 1987). Efficiency undermined by interprovincial barriers to trade.
|Under rectification program price control tightened in 1988–89: (1) fixed and guided prices subject to central (State Council) approval; (2) 50 market prices brought under control.|
Relaxation in 1990 and 1991. Prices under State Council reduced to 5. Direct control on market prices eliminated by 1991. “Indirect” measures used to realize price targets: mainly management of inventories of essential commodities.
Large increase in ration prices of grain and edible oil in May 1991 and April 1992, and adjustments to administered prices of goods and services. Rationing abandoned in 1993.
Ratio of fixed/guided/market prices down to 28:17:53 by 1991. By early 1993, 90 percent of prices “market-determined.” Opening of national metals exchange and wholesale market for nonferrous metals.
|Gradual increase in proportion of commodities sold at market prices.|
Publication of “price law” to prevent speculation in a more market-oriented environment.
Establishment of wholesale markets, including forward trading.
|Widespread state ownership, particularly large and medium-sized enterprises. Variously answerable to central, provincial, municipal, or county authorities. Collectives and rural enterprises answer to their local government entity. Private enterprises are small and mainly in retail sector.|
Some joint-stock ownership mainly by one enterprise in another, from 1986. Foreign investment through fully owned enterprises and joint ventures.
|Securities exchanges open in Shanghai (1990) and Shenzhen (1991).|
By end 1991, 6,000 share-issuing companies exist nationwide, of which 69 are listed: 11 are publicly quoted in Shanghai, 6 in Shenzhen. From 1992. foreigners can purchase shares in Chinese enterprises.
|More widespread access to securities exchanges to be encouraged.|
Conglomerates of SOEs to be established to allow greater autonomy and efficiency. Experiments are under way in 100 of the 3,000 existing groups. Experiments with joint-stock companies and other forms of shareholding are under way.
|State-Owned Enterprises (SOEs)|
|Experiments with income taxation to replace direct profit transfers to the budget.||Contract responsibility system became formalized for large and medium-sized SOEs. These specify performance targets, supply quotas, and tax obligations.|
By 1988, 90 percent of SOEs covered by contracts. First generation of contracts cover three–five years from 1988.
|Second generation of contracts similar to first but shorter periods (one–two years) because of financial problems.|
Some experiments on new forms of contracting and taxation (see also item VII). Experiment involves 2,000 enterprises in 35 locations.
|Twenty measures to revitalize SOEs announced in 1991 being implemented. Increased autonomy of enterprise management, under the new Enterprise Law.|
|Mandatory planning: proportion of output subject to quota declines substantially from the early 1980s. By 1987 about one-third of goods (based on retail sales value) sold under the plan, down from two-thirds in 1980. But many intermediate goods remained largely under direct control, most steel, coal, and almost all petroleum.||“Mutual pledge” system established to protect key SOEs from effects of rectification program: in late 1989, 234 key enterprises received preferences in return for guaranteed sales to the state.||Extent of mandatory planning to be reduced.|
|Investment: Experimental approach to give SOEs greater autonomy in investment decisions, in line with greater profit retention.|
Market sanctions: enterprises largely immune from closure.
|Responsibility for financing investment largely shifted from the Government to the SOEs (in 1978, 60 percent government financed, in 1987, 20 percent). SOEs allowed access to bank credit and retained earnings. A bankruptcy law formulated in 1986.||In 1989, under the rectification program, many projects were cancelled.|
Restrictions on investment eased during 1990 and 1991.
Bankruptcy law became effective in 1988, but remained almost unused. After 1991, 3,000 inefficient enterprises were merged with others.
Increases planned in key state construction projects. Intention to apply bankruptcy law more widely.
|Township and Village Enterprises (TVEs)|
|Existing rural enterprises benefited from increased investment associated with rising agricultural income and availability of surplus labor.||These enterprises designated as TVEs in 1984 being given concessional tax treatment and favorable access to credit.||Credit restrictions under rectification program result in closures, a sharp drop in growth rate, and loss of employment. Credit restrictions eased in second half of 1990. TVE growth accelerates sharply.||Further development of TVEs.|
|Private traders began to be encouraged in small shops and restaurants.||In 1984–85 about three-fourths of small commercial SOEs were contracted or leased to collectives or individuals.||Some controls were reintroduced under the rectification program.||Privately owned tertiary sector activities to be strongly supported.|
|V. Wages and Employment|
|Employment guaranteed in state-owned enterprises and government units.|
In 1978 bonuses reintroduced, capped at three months’ salary. Generally distributed on egalitarian basis, i.e., not based on individual performance.
Wages thus include basic wage (centrally determined); component based on level and seniority in the enterprise; and bonuses determined by enterprises or at local level.
Wages supplemented by welfare provision: food and rent subsidies; income in kind; other services (e.g., medical and education through the workplace).
|Since 1986, recruits to SOEs can be hired under labor contacts (1–10 years’ duration). Many exceptions. Cap on bonuses replaced by tax on excessive bonuses.||In 1991, policy announced for next five years, under which uniform wage increases would be phased out. Government would control only the amount of the increase in the total wage bill.||Cast-iron guarantees of jobs to be phased out by the year 2000. Nominal wages to be increased as various reforms implemented, including phasing out of food and rent subsidies. Eventual complete monetization of wages.|
|Pre-1978 system basically unchanged. Housing supplied by municipalities or by work units, involving subeconomic pricing (rent covers one-fifth of operating costs); costs of subsidies and investment borne by enterprises and Government; nonmarket allocation of housing; no housing finance system.||Experimental steps to raise rents (and wage supplements) in a few cities began in 1985.||Focus shifted in 1989 to sale of publicly owned housing, but at steeply discounted prices. Urban rents raised 200-300 percent in early 1992.|
Experimental housing reform began in Shanghai in 1991. Major features: housing bonds issued to renters; raising rents to cover costs; continued link between workers’ housing and their work units.
|Over next ten years, gradual reform involving raising rents to cover costs; selling public housing to state employees (state maintains some equity in each house); promotion of financing schemes (including bonds, housing funds, and cooperatives).|
|VII. Social Security|
|Work units (enterprises and government agencies) responsible for most social security: pensions; job security (a proxy for unemployment benefits); welfare, often including medical and education.|
Coverage not universal: excludes individuals, contract workers, employees of TVEs, and other rural enterprises.
|Experimentation with pension pooling in a few regions began in 1986.||By early 1990, pension pooling among enterprises in 2,200 cities had begun.|
Contributory pensions are under experimentation in five coastal cities.
Experimental unemployment schemes under way in some localities to facilitate implementation of bankruptcy law.
|In the medium term: develop a national pension system, particularly for those not now covered; unemployment insurance to have wider coverage; refine medical care arrangements; comprehensive social security schemes in special economic zones.|
|VIII. Fiscal Policy|
|Resource Shoring (Center/Provincial Relations)|
|Various forms of revenue sharing: local governments had responsibility for negotiating management contracts, including tax/profit arrangements with enterprises. Structure favored granting of tax incentives.||Re venue-sharing contracts between central government and provinces started in 1987 or 1988 for three–four year periods. Typically, these involve an agreed base figure and annual rate of increase.||New contracts due to start in 1991 under negotiation. Some experiments with clearer demarcation of center/local resources began in nine provinces in 1992.||Clearer demarcation of center-local resource assignment to become universal.|
Strengthening central control over fiscal policy.
|Consolidated budget; financing flows treated as revenue and expenditure items.||No change in presentation. Rapid growth of extrabudgetary funds (includes enterprises’ retained earnings and government units).||Two-tier system announced in 1991 separating current and capital accounts.||Eventual presentation of budget according to international conventions.|
|In 1983, taxation replaces profit transfers from enterprises to Government. Enterprises assume greater responsibility for own funding, own investment.||From 1987, contract responsibility system applied to most medium-sized and large SOEs.|
Nominal tax payments specified (undermines 55 percent tax rate). Loan repayments are tax deductible. Adjustment tax and other levies imposed on above-contract profits.
|New generation of contracts resembles previous generation, but many enterprises seek shorter contracts. Experiments with new system to separate profit and tax: lower tax rates; loan repayments not deductible; contracting on after-tax profits.|
In 1989, extrabudgetary funds of enterprises subjected to 10 percent levy to preserve government revenue.
|Adoption of new tax system. Tax rate for large and medium-sized enterprises would be unified; contracting on after-tax profits; loan amortization nondeductible.|
|Wholly owned foreign enterprises taxed at 20–40 percent. Joint ventures taxed at 30 percent. Various incentives (tax holidays, etc.) for new enterprises.||No significant changes. But local governments in SEZs and open coastal cities have considerable discretion in granting additional concessions.||Two tax scales merged in 1991, effective 1992, with tax rate unified at 33 percent.||Unification with domestic enterprise taxation.|
|Taxes on goods and services|
|Through 1983, indirect taxation of enterprises was conducted through a turnover tax, the consolidated industrial and commercial tax, applied to industrial production, some agricultural sales, imports, retailing, transport, communications, and services.||In 1984 three separate indirect taxes were introduced. Tax rates often set in association with prices to equalize profits, resulting in a wide range of tax rates as follows (1988): value-added taxes—12 rates; product taxes—22 rates; business taxes—4 rates.||Business tax rate change proposed in 1990 and 1991 for revenue purposes; not implemented. VAT extended to petrochemicals.||VAT to be extended to all industries while simplifying and rationalizing the rate structure. Eventual uniform rate after price reform.|
|Taxes on construction|
|Tax (at 10 percent) on construction undertaken outside the state investment budget.||In 1991, an investment orientation tax introduced. Variable rates reflect investment priorities.|
|IX. Financial Sector|
|Monobank system persists. Specialized banks continue to operate in sharply delineated fields.||In 1984, commercial banking activities removed from People’s Bank of China, which becomes a central bank. Specialized banks are permitted to engage in commercial banking. In 1986, banks established at provincial level.|
In 1987, two “universal” banks permitted to compete with existing banks in all forms of business. Networks of urban and rural credit cooperatives supervised by the industrial and agricultural banks. From 1986, all banks allowed to engage in foreign transactions.
|Through 1988, a gradual erosion of the sharp demarcation among banks that began to transact outside their own specialization; enterprises allowed to work with more than one bank. Limited competition in interest rates.|
Under rectification program, specialization reasserted, and competition in interest rates reduced.
Competition continued to take the form of the provision of services. Commercial banks expanded their foreign operations.
|Strengthening of macroeconomic and supervisory role of the People’s Bank as central bank. Reform of payments and clearing systems.|
Banking laws to be enacted.
|Trust and investment companies established for loan and equity financing of domestic enterprises; international companies to raise foreign funds.|
Insurance companies, leasing companies, and financial companies set up, many at provincial level or as part of enterprise groups. Rapid growth of TICs led to restriction of activities in 1988 to permit detailed examination of their operations.
|Activities resumed in 1989 with tighter supervision from People’s Bank.|
375 TICs in operation by end-1991, of which 120 authorized to conduct foreign transactions.
|From 1981 government securities issued through compulsory sales to enterprises and individuals (the former at low interest rates).|
Enterprises were permitted to issue bonds from 1985. High yields, especially in rural areas.
Private enterprises permitted to issue shares from 1982. Shares do not convey ownership. Restrictions imposed in 1987.
|Some SOEs issue shares from 1985, which do not convey ownership rights. Some restrictions imposed in 1987. Earmarked bonds for key construction projects began in 1987.||Restrictions placed on interest rates in interbank market (a margin around the People’s Bank overnight rate). Secondary markets for treasury bonds opened in major cities. After slow start, secondary market develops rapidly (computerized quotation and trading system established in 1990). Experiments with voluntary placement of government bonds begun in 1991.|
Securities markets open in Shanghai (December 1990) and Shenzhen (May 1991) (see item III).
Experiments with auctioning land use rights accelerated in 1992.
|Continue extension of voluntary government bond placement. Development of interbank and money markets, and of new financial instruments.|
More extensive listing of enterprises on the securities markets and opening markets in other cities.
Securities Law to be enacted.
|Monetary policy centers on the credit plan, which is the financial counterpart of the physical plan.||Credit plan remains central instrument of monetary policy.|
De facto decentralization since provincial branches of People’s Bank often acquiesce to credit priorities of the provinces.
Reserve requirements introduced at high levels when the new banks were established in 1984. In 1985 they were lowered and unified.
|Re centralization of decision making to the headquarters of People’s Bank. Credit plan abruptly tightened in 1988 in the face of inflation, then relaxed to promote growth and protect SOEs.|
Some decentralization permitted to provincial branches in adjusting the allocation of plan during 1991.
|Introduction of open market operations initially through issuance of short-term bills.|
Gradual increase in autonomy of banks.
|Interest rates established by the People’s Bank.||Banks permitted to adjust lending and deposit rates within margins specified by People’s Bank.||Under rectification program, reserve requirements raised; then “excess reserve” requirements introduced in light of high liquidity and inflation threat.|
Under rectification program, interest rates raised sharply and interest rate competition largely eliminated.
Through 1990 and 1991, interest rates were reduced in three steps. Interest rates increased in 1993.
Gradual increase in reliance on interest rates, determined through market forces.
Some Broad Hypotheses
This appendix presents some statistical evidence bearing on a set of economic hypotheses relating to economic growth across a sample of 28 provinces, autonomous regions, and municipalities. Among the hypotheses investigated are
- the share of state ownership in total production is negatively related to growth performance;
- the degree of government intervention, such as control through production planning, price setting, and sales restrictions, is negatively correlated with provinces’ performance;
- the central-provincial fiscal relation plays an important role: provinces with revenue-sharing schedules that mandate only small remittances to the center show stronger growth;
- the degree of openness of a provincial economy to international trade will positively affect its growth;
- foreign capital utilization will have a positive effect on growth;
- a “catch-up” hypothesis: economies with lower initial levels of economic development should grow faster than those with a higher initial level.
The hypotheses that are chosen all yield important policy implications for regional economic growth. It is also important that these hypotheses are testable with available data, but because of data limitations, the exercise is not exhaustive. The regression equation is estimated as follows (t-ratios are in parentheses):
In the regression, the real annual average growth rate of per capita industrial output value during 1981–90 is chosen as the dependent variable, GR.110 ONS is the share of state-owned industrial output in total industrial output, LTI is the share of light industry’s output in total industrial output, SRR is the approximated share of revenue submitted to the center, FCR is the ratio of foreign capital actually utilized to total fixed assets investment, and PNI is the per capita income level in the initial year, 1981, Among the above variables, ONS and LTI are constructed by averaging 1980/81 and 1990 data; SRR and FCR are 1990 data because 1981 data are not available.
The estimated results confirm a number of qualitative observations made in the main text. The model yielded an R2 of 0.86, implying a surprisingly high explanatory power compared with many cross-section studies on growth. All the explanatory variables have the expected signs and are all statistically significant except FCR (as measured by t-ratios).
The negative coefficient of ONS verifies the hypothesis that higher shares of nonstate ownership promote growth. Although the coefficient of LTI is positive, it is only marginally significant—a result that could be improved by reducing the number of explanatory variables—since there is some evidence of collinearity between ONS and LTI— the correlation coefficient between the two is 0.55. This interpretation is consistent with the fact that slower-growing heavy industries (such as steel, concrete, coal mining, and electricity) are subject to tighter control of production, price setting, and investment approval than light industries. The hypothesis that provinces with favorable revenue-sharing schedules have a stronger potential for growth is also supported by the results, with the coefficient of SRR being significantly negative.
The hypothesized positive effect of high “openness” on growth was not tested in the final form of the equation, because if both the export/GNP ratio and FCR are included in this model, a problem of multicollinearity would arise, leading to insignificant results for both variables. With a correlation coefficient between the two variables as high as 0.77, only one of the two variables is needed, and, statistically, the fourth and fifth hypotheses should be viewed as one. In a number of trials, FCR provided the better fit.
In the full model, the coefficient on FCR had the correct sign but was not significant. To test whether this stemmed from the number of explanatory variables employed, a simpler specification yielded the following result:
The coefficient on FCR became significant at the 1 percent confidence level. This result, to some extent, confirms the efficacy of China’s preferential policy for foreign investment and also supports extending the open-door policy to inland provinces.
The final coefficient, for the initial level of per capita income, PNI, yielded more robust results in a log-linear specification. The coefficient is negative as the “catch-up” theory expected, a result that may arise from the more rigid industrial structures in the higher-income areas and the greater resistance to change in these more economically important centers.
Impact of Center-Local Fiscal Relations on Guangdong’s Performance
This section applies the estimated equation of growth determinants (see above) to calculate the effect on growth if Guangdong had been subjected to one of the most unfavorable revenue-sharing regimes—that between Zhejiang and the center.111 From 1983 to 1990, the approximate share of net transfers to the center in Guangdong’s budgetary revenue ranged from 0.037 to –0.150, whereas the share of Zhejiang ranged from 0.457 to 0.215. The differences between Guangdong and Zhejiang in their share of remittances were 0.49 and 0.37 in 1983 and 1990, respectively. Substituting 0.43, an average value of the difference, into the estimated equation (1), it was found that the difference in growth rates arising from the different shares of remittances was 0.59 percentage points. In other words, with Zhejiang’s fiscal regime, Guangdong would have had a growth rate of per capita national income that was 0.59 percentage point lower than the actual during 1981–90.
However, this is only a static exercise, which assumes fixed revenue-sharing schedules over time. The conclusion drawn from this may overestimate the effect of fiscal relations on growth. By looking at the change in Guangdong and Zhejiang’s share of net transfers to the center, it is clear that although Zhejiang had a higher share of remittance than Guangdong over the whole interval, the share was sharply decreasing for Zhejiang but relatively stable for Guangdong. It suggests that over time there was some leveling out of the benefits arising from differences in fiscal transfers to the center.
Role of Exports in Guangdong
To identify the contribution, or relative importance, of the export sector and the nonexport sector to the high GDP growth rate of Guangdong’s economy, the following formula is proposed:
where NEP is nonexport domestic output value, and EXP is the value of exports. In the empirical analysis, NEP is calculated by subtracting EXP from GDP.
Consider two periods of production in the economy, t and t+1. Then the growth rate of GDP can be written as
where αD = NEPt/GDPt the share of nonexport production in total GDP at t, αE = EXPt/GDPt, the share of exports in total GDP at t.
The first term in equation (4) represents the contribution of growth of nonexport production to total GDP growth. It can be understood hypothetically as the growth rate of the economy in the absence of the export sector. The second term measures the contribution of the growth of the export sector to total GDP growth. Using this formula, we calculate the contribution of the export and nonexport sectors both in Guangdong and China as a whole.
The results are shown in Table A1. Between 1978 and 1990, the annual average GDP growth rate in Guangdong was 12.4 percent, 3.6 percentage points higher than the national average. The contribution of export growth to total GDP growth in Guangdong is 37.4 percent, significantly higher than the national average of 19.9 percent. As a result, the part of GDP growth induced by domestic demand in Guangdong is 7.76 percent, only moderately higher than the national average of 7.02 percent. Of the 3.64 percentage point difference between Guangdong’s GDP growth and the national GDP growth rate, 2.90 percentage points (or 79.6 percent of the total difference) are explained by the difference in export growth, leaving only 0.74 percentage point (or 20.4 percent of the total difference) to be explained by the difference in nonexport production. This suggests that in the absence of a booming export sector, the actual growth rate in Guangdong would not have been significantly higher than the national average.
|Share of contribution||37.4||62.5||19.9||80.0|
|Contribution to real annual growth||4.6||7.8||1.7||7.0|
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Note: For information on the title and availability of Occasional Papers not listed, please consult the IMFPublications Catalog or contact IMF Publication Services.