Front Matter
Author:
Mr. Michael W. Bell
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Ms. Kalpana Kochhar
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Hoe Ee Khor https://isni.org/isni/0000000404811396 International Monetary Fund

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Language:
English
Keywords:
OP; enterprise; economy; government; market forces; state
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Abstract

This paper reviews China's experience with market-oriented reform since 1978, including domestic reforms, the opening of the economy to foreign trade and investment, and the decentralization of decision making. It identifies special conditions that may have affected China's capacity to implement reforms, assesses the impact of the reforms on the structure of the economy and on its integration into the world economy, examines the effect of the reforms on macroeconomic management and stability, and draws implications for the direction of China's future reform strategy.

© 1993 International Monetary Fund

Library of Congress Cataloging-in-Publication Data

Bell, Michael W.

China at the threshold of a market economy / Michael W. Bell, Hoe Ee Khor, and Kalpana Kochhar with Jun Ma, Simon N’guiamba, and Rajiv Lall.

p. cm. — (Occasional paper, ISSN 0251-6365 ; 107)

“September 1993.”

Includes bibliographical references.

ISBN 9781557753496

1. China—Economic policy—1976– 2. China—Economic conditions—1976– I. Khor, Hoe Ee. II. Kochhar, Kalpana. III. Title. IV. Series: Occasional paper (International Monetary Fund) ; no. 107.

HC427.92.B44 1993

338.951—dc20 93-34529

CIP

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Contents

  • Preface

  • List of Abbreviations of China’s Provinces, Municipalities, and Autonomous Regions

  • I. Overview

    • Politics of Reform

    • Evolution of Conceptual Framework

    • Phases of Reform

      • First Phase, 1978–84

      • Second Phase, 1984–88

      • Third Phase, 1988–91

      • Fourth Phase, 1992-Present

    • Salient Features of the Chinese Approach to Reform

  • II. Initial Conditions and Special Characteristics of Chinese Reform

    • Initial Conditions and Reform Environment

      • Macroeconomic and Structural Conditions

      • Domestic Saving

      • Access to External Financing

      • Openness of the Economy

    • Special Characteristics of Reform

      • Regional Policy

      • Decentralization and its Effects

      • Enterprise Ownership

      • Rural Land Tenure

    • Box 1. China’s Nonstate Industrial Sector

    • Box 2. Shareholding Arrangements in China’s State-Owned Enterprises

  • III. Reform of the Domestic Economy

    • Major Reforms During 1978 to Early 1992

      • Agriculture

      • Rural Enterprises

      • Prices and Mandatory Planning

      • State-Owned Enterprises

      • Employment, Social Benefits, and Housing

      • Fiscal Reform

      • Financial Sector

        • Banking System

        • Nonbank Financial Institutions

        • Securities Markets

        • Monetary Policy Instruments

      • Extending the Reform Agenda: 1992 and Beyond

      • Legal and Regulatory Framework

      • Role and Functions of Government

      • Macroeconomic Management

      • Establishment of Markets and Related Infrastructure

      • Price Reform

      • Agriculture

      • Enterprise Reform

        • Enterprise Regulations

        • Shareholding System

        • Enterprise Groups

        • Loss-Making Enterprises

        • Surplus Labor and Tertiary Sector Development

      • Employment, Social Security, and Housing

      • Land Use System

      • Financial Reforms

      • Nonstate Sector

      • Box 3. Chronology of Reform Initiatives, 1992–July 1993

      • Box 4. Enterprise Regulations

  • IV. Opening Up and External Policies

    • Policies at the National Level

      • Trade System

      • Exchange System

    • Policies at the Regional Level

      • Special Economic Zones

        • The Original SEZs

        • Hainan Special Economic Zone

      • Open Coastal Cities

      • Pudong New Area

      • Inland Provinces

    • Review of Progress

    • Box 5. Foreign Exchange Retention and the Swap Centers

    • Box 6. The Impact on the Economy of Opening Up: Selected Features

  • V. Decentralization and Regional Development

    • Policy Orientation: Industrial or Regional?

    • Evolution of Ownership Structure

    • Center-Local Financial Relations

      • Fiscal Relations

      • Credit Policy

      • External Policies

    • The Experience of Guangdong

      • The Fastest Growing Region?

      • Selected Features in Guangdong’s Development

        • Role of Exports

        • Foreign Investment and Proximity to Hong Kong and Macao

        • Fiscal Relationship with the Center

        • An Experimental Reform Zone and the Open-Door Policy

      • Can Guangdong’s Experience Be Replicated?

        • Inland Provinces

        • Border Provinces

        • Coastal Provinces

    • Conclusions

  • VI. Economic Impact of Reform

    • Impact on Economic Activity

      • Growth

      • Agricultural Output

      • Industry

      • Income Distribution

    • Integration into the Global Economy

      • Background

      • Trends in Foreign Trade and Investment

      • Assessing the Degree of Integration

    • Decentralization and Macroeconomic Policy

      • Fiscal Policy

      • Monetary Policy

      • External Policies

    • Macroeconomic Management and Stability

      • Background

      • The Cycles

        • First Cycle: 1979–82

        • Second Cycle: 1984–Early 1986

        • Third Cycle: Mid-1986–Late 1988

        • Fourth Cycle: Late 1991–Present

      • Understanding the Cycles

    • Structural Reforms to Promote Market-Based Macromanagement

      • Financial Sector

      • Enterprise Reform

      • Fiscal Reform

      • External Sector Policies

  • VII. Conclusions

  • Appendices

  • I. Synopsis of Reform from 1978

  • II. Performance of the Provinces: A Statistical Analysis

  • Bibliography

  • Tables

  • Section

  • II 1. Selected Macroeconomic Indicators

    • 2. Selected Countries: Debt and Debt-Service Indicators

    • 3. Selected Economies: Growth Rates of GNP and GNP Per Capita, 1960–76.

    • 4. Total Fixed Asset Investment

    • 5. Fixed Asset Investment of State-Owned Enterprises

  • III 6. Proportion of Output and Sales at Fixed, Guided, and Market Prices

  • IV 7. Basic Indicators of SEZs and Open Coastal Cities, 1991

    • 8. Selected Indicators of SEZs and 14 Coastal Open Cities

    • 9. Income Tax Incentives in Open Economic Zones

    • 10. Incentives in Open Economic Zones

    • 11. Cross-Country Comparison of Tax Rates

  • V 12. Central-Local Resource-Sharing Contracts, 1988–92

    • 13. Central and Local Revenues

    • 14. Source of Foreign Investment in Guangdong, 1991

  • VI 15. Gross Value of Industrial Output by Form of Ownership

    • 16. External Sector Indicators

    • 17. Foreign Trade by Major Commodity Groups

    • 18. Selected Macroeconomic Indicators

    • 19. Key Macroeconomic Indicators

    • 20. Selected Recent Economic Indicators

  • Appendix

  • II A1. Decomposition of GDP Growth into Export and Nonexport Growth in Guangdong, 1978–90

  • Charts

  • Section

  • IV 1. Exchange Rate Developments

  • V 2. Provincial Ownership Structure

    • 3. Provincial Budgetary Operations, 1990

    • 4. Provincial Monetary and Credit Operations, 1990

    • 5. Regional External Developments, 1990

    • 6. Regional Income and Consumption Disparities

  • VI 7. Selected Economic Indicators

    • 8. Labor Productivity in Industrial Sector in Selected Economies

    • 9. Real Effective Exchange Rates in Selected Economies

    • 10. Share of World Trade

    • 11. Measures of China’s Openness

    • 12. Key Macroeconomic Indicators

The following symbols have been used throughout this paper:

… to indicate that data are not available;

— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

– between years or months (e.g., 1991–92 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

/ between years (e.g., 1991/92) to indicate a crop or fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.

Preface

This Occasional Paper undertakes a comprehensive review of China’s reform experience since 1978. It identifies special conditions that may have affected China’s capacity to implement reforms and draws implications for the direction of China’s future reform strategy.

It is based on research papers prepared by the authors during 1992–93. Michael Bell, Hoe Ee Khor, Kalpana Kochhar, and Simon N’guiamba are all staff members of the IMF’s Central Asia Department; Rajiv Lall is a staff member of the World Bank; and Jun Ma was a summer intern in 1992. Ms. Kochhar and Messrs. Bell and Khor integrated the material. A major part of the work on regional policies, including the statistical analyses, was carried out by Mr. Ma, while Mr. Lall and Mr. N’guiamba contributed material on the nonstate sector and China’s integration into the global economy, respectively. The authors would like to thank Yusuke Horiguchi, Ichiro Otani, and Douglas Scott for valuable comments and support, and Viola Chou for research assistance. Esha Ray and Elin Knotter of the External Relations Department edited the manuscript and coordinated production of the publication.

The opinions expressed in the paper are those of the authors and should not be construed as representing the views of the IMF, its Executive Directors, or the Chinese authorities.

List of Abbreviations for China’s Provinces, Municipalities, and Autonomous Regions

AH

Anhui1
BJ

Beijing1
FJ

Fujian2
GD

Guangdong2
GS

Gansu1
GX

Guangxi2
GZ

Guizhou1
HA

Hainan2
HB

Hubei1
HE

Henan1
HI

Hebei2
HL

Heilongjiang3
HN

Hunan1
JL

Jilin3
JS

Jiangsu2
JX

Jiangxi1
LN

Liaoning2
NM

Inner Mongolia3
NX

Ningxia1
QH

Qinghai1
SA

Shaanxi1
SC

Sichuan1
SD

Shandong2
SH

Shanghai2
SX

Shanxi1
TJ

Tianjin2
XJ

Xinjiang3
XZ

Tibet3
YN

Yunnan3
ZJ

Zhejiang2

Notes

1

Inland.

2

Coastal.

3

Border.

Cited By

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Cover China at the Threshold of a Market Economy
China at the Threshold of a Market Economy
ISBN:
9781557753496
ISSN:
0251-6365
Publication Date:
16 Jun 1993
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557753496.084
Pages:
104

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