Back Matter
Author: Mr. Michael W. Bell, Ms. Kalpana Kochhar, and Hoe Ee Khor1
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund
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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.

Appendix I Synopsis of Reform from 1978

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Appendix II Performance of the Provinces: A Statistical Analysis

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):

GR=35.13−0.20ONS+6.87LTI−3.18SRR+3.47FCR−2.63log⁡(PNI)(7.11)(−6.23)(1.30)(−4.17)(0.72)(−3.62)    (1)
R2=0.856,N=28,DF=22.

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:

GR=10.30+17.79FCR−0.0074log(PNI)⁡(18.39)(2.72)(−5.28)    (2)
R2=0.55,N=28,DF=25.

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:

GDPt=NEPt+EXPt,(3)

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

GDPt+1/GDPt−1=(NEPt+1+EXPt+1)/GDPt−1=(NEPt+1/NEPt−1)*αD+(EXPt+1/EXPt−1)*αE,(4)

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.

Table A1.

Decomposition of GDP Growth into Export and Nonexpert Growth in Guangdong, 1978–90

(In percentages, unless otherwise specified)

Sources: China Statistical Yearbook, 1991; and Guangdong Statistical Yearbook, 1990.

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1

Popularly referred to as the “gang of four.”

2

Under Mao, the principal contradiction had been defined as the continuing struggle between classes, and hence the main task of the party was to continue the revolutionary struggle.

3

The pragmatic approach embodies the principle of “seeking truth from facts” and has been described as “crossing the river by feeling the stones under the feet.”

4

This perception of the relation between planning and the market is often described as the “bird in the cage” theory, which was propounded by party veteran Chen Yun. In this metaphor, the market is the bird and the plan is the cage. The cage can be enlarged to give greater freedom to the bird, but without the cage, the bird will fly away—which is analogous to disorder in the market.

5

In this view, the relation between the state and the market is captured by the expression “the State controls the market, the market guides the enterprises.” For an elaboration of the theoretical framework, see Zhao Ziyang (1987).

6

Collectives are basically communities at the level of the village or township or a neighborhood in an urban area.

8

Section III elaborates on enterprise reforms to date.

9

The total stock of debt in 1978 is estimated to have been 12 percent of exports (see Cheng (1982)).

10

These figures should be treated with some caution as serious conceptual and practical problems exist in measuring savings in China.

11

Feltenstein, Lebow, and van Wijnbergen (1990) find evidence for the existence of “forced” savings in China, whereas Qian (1988) concludes that the data do not reject the hypothesis that the high savings rates are the result of structural and behavioral shifts and do not represent involuntary saving.

12

The process of opening up is described more fully in Section IV below.

13

See Singh (1992) for a more detailed discussion of these problems.

14

Investment by SOEs is further subdivided into capital construction—involving the construction of new facilities and the expansion of capacity; technical transformation and updating—aimed at modifying and upgrading existing facilities; and other investment, mainly oil and mineral exploration.

15

Generally speaking, large infrastructure projects and major investments in key SOEs are approved and financed by the central government. Smaller infrastructure projects and investments by medium- and small-scale SOEs are authorized by provincial and local authorities. Finally, investments that are outside the plan are largely undertaken by the collective and the township and village enterprise (TVE) sector. The latter are financed mainly from bank loans and the retained earnings of enterprises.

16

For more details, see Riskin (1987).

17

In 1984, the initial contract period of five years was extended to 15 years for annual crops and to 50 years for tree crops. The transfer of land use rights was legalized in 1988 to encourage private farm investment.

18

Another 30 million are reportedly employed by individual and small private businesses. By comparison, employment in the urban state-owned (including the government) and collective units are estimated to be about the same.

19

Market prices are not entirely tree of official intervention, since there are three further groups of commodities. There is a small group of perhaps 20–30 items for which producers are obliged to report their intention to increase prices. A second group consists of items for which there is strong seasonal demand, and periodically price caps are imposed. Other commodities are tree of official intervention.

20

For instance, in 1990, petroleum, coal, and gas prices were adjusted by 20, 45, and 65 percent, respectively, although they remained far below international levels.

21

With the exception of the rectification program, when many controls were recentralized.

22

At the same time, it introduced various forms of leasing arrangements for smaller enterprises, and to a very limited degree, the incorporation of joint-stock companies.

23

Employment reform in China is often characterized as breaking the three irons, namely, the iron rice bowl (guaranteed employment, housing, and other benefits), the iron chair (job security), and the iron wage (wages that are not related to performance).

24

It is estimated that over 400,000 workers have benefited from unemployment relief.

25

In the past, this lack of a housing market was a major deterrent to potential migrants into any city. However, the situation has improved in recent years as farmers in the outskirts of the cities have constructed houses for rent to rural migrants.

26

Although there are a number of variants, the typical contract between the province and the center is similar to that with the enterprises in the sense that revenue transfers are contracted according to revenue in a base year with annual increments agreed upon ex ante.

27

About 5 percent of the total credit quotas of specialized banks are set aside for the provincial branches of the People’s Bank to allocate at their discretion.

28

Most of the transactions are between branches of specialized banks and are arranged through a financial intermediary sponsored by the local branch of the People’s Bank.

29

These shares did not convey any right of ownership but paid interest and a dividend.

30

Under the old central planning system, the SOEs played a key role in extracting surplus from the economy for investment and for financing the budget. With the rapid growth of the nonstate sector, the tax base of the budget has shrunk because the nonstate sector is subject to lower taxes or tax exemptions. For an elaboration of this point, see McKinnon (1992).

31

Enterprises with incomes below a certain level are subject to a lower rate of 24 percent, whereas enterprises located in the special economic zones will continue to pay a special rate of 15 percent.

32

The authorities do not regard the conversion of state-owned enterprises into shareholding companies as “privatization,” which has the connotation of wholesale conversion of state-owned enterprises into private enterprises. Instead, they see this as a means of raising funds for restructuring and of introducing a more effective management system while retaining a significant ownership share and ultimate control over the companies.

33

These are shareholding companies that issue shares to the general public and that may apply for listing on the two stock exchanges. In the restructuring, the proportion of the share belonging to the state, municipality, or township is determined by an appraisal company according to the net value of the asset in the enterprise accruing to the state, municipality, or township.

34

These enterprises are mainly concentrated in the transportation and energy sectors.

35

In late 1992, a Hong Kong investor paid $3 million to buy a 51 percent share in a state-owned textile factory in Wuhan. The factory was converted into a shareholding company, a new management was introduced, and more than half of the work force of 2,230 was retrenched. Also, a major company was recently established in Hong Kong that has bought into state-owned enterprises in several coastal cities with the aim of restructuring them into profitable enterprises. In Sichuan province, it was reported that 16 small to medium-sized SOEs would be auctioned off to foreign investors in 1993.

36

Although the bankruptcy law was enacted in 1986, it was rarely applied in the early years because of strong resistance from the workers and the commitment of the authorities to guaranteed employment. However, in 1992–93, the law has been applied more frequently as the unemployment insurance scheme has developed and the attitude of the public has changed.

37

In the rural sector, it is estimated that redundancy may be as high as one-fourth of an estimated labor force of 430 million.

38

These policies are described in the Decision on Expediting the Development of the Tertiary Industry published on July 16, 1992.

39

In Shanghai, it was reported that 976 SOEs employing 1.34 million workers or 78 percent of the city work force had adopted the labor contract system by end-1992.

40

These funds are modeled on the Central Provident Fund of Singapore. In Shanghai, the contributions by both the employers and the employees are set at 5 percent of the wage bill.

41

The main laws include (1) the Law on Land Administration enacted in June 1986 and amended in December 1988; (2) Provisional Regulations Concerning Sale and Use of State-Owned Land in Cities and Towns; and (3) Regulations for Implementation of the Land Administration Law promulgated by the State Council in February 1991. The Law on Land Administration states that all land belongs to either the state or the collectives, all land should be registered and recorded by local governments, which shall issue certificates for land use rights, the land use rights are transferable, and a leasehold system of land use rights shall be implemented.

42

For transfers of land use rights in the secondary market, a progressive tax is imposed on the appreciation in their value. To prevent speculative transactions, transfers of land use rights are allowed only after 25 percent of the original investment has been fulfilled.

43

The three main categories of policy-based lending are financing of state investment projects, credits for grain procurements, and trade credits for mandatory imports,

44

An important issue to be dealt with is the restructuring of the balance sheets of the specialized banks to separate out nonper-forming loans that arose from policy-based lending in support of government policies, including those of local governments.

45

The term “open economic zones” in this paper covers the many forms of areas and zones that are designed to promote foreign trade and investment in China. They include the special economic zones, open coastal cities, the delta areas, and the development zones opened in many inland and border cities since 1992.

46

The guidance plans assign targets to provinces and FTCs for the values of exports and imports of a range of products (in some provinces the guidance was given de facto mandatory status by the local governments). In 1991. the guidance plan accounted for 15 percent and 20 percent of exports and imports, respectively.

47

In 1991, licensing covered 55 percent of exports and 40 percent of imports.

48

Dunng 1992, lengthy negotiations with the United States culminated in a memorandum of understanding that entailed a substantial liberalization of bilateral trade.

49

The most substantial of these was on December 31, 1992, when customs tariffs were reduced by an average of 7.3 percentage points on 3,371 items representing 53 percent of dutiable items.

50

One major purpose of the original arrangements was that they provided FFEs with a means to meet a prevailing exchange control requirement that they should maintain a balanced foreign exchange position.

51

Since 1987, the exchange rate has been formally classified by the IMF as a more flexible arrangement (other managed float). See the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions, various issues.

52

The term “regional” is used to allude to the several tiers of public ownership and administration other than the central: provincial, municipal, county, township, and village. Most references in this paper relate to policies and developments at the provincial and municipal level.

54

One major difference is that enterprises operating in SEZs are not obliged to export all of their output.

55

Including the special economic zone of Hainan Island.

56

Per capita national income in Guangdong was Y 313 in 1978, almost the country’s average of Y 315, whereas in Fujian it was only Y 233, ranking it twenty-fifth among the 29 provinces.

57

Equity joint ventures are limited liability corporations in which Chinese and foreign partners invest and operate jointly, sharing the profits, losses, and risks. Contractual joint ventures may involve the foreign partner providing technology and a capital input, but with a predetermined schedule of return negotiated in advance. The Chinese partner usually provides land, materials, the work force, basic buildings, and services, and so forth.

58

Domestic investment from other areas of China has also taken place in the SEZs.

59

In certain cases some financing for such investment has come from policy-based lending, supported by credit from the central bank.

60

This was the rate applied in Hong Kong at the lime the policy was formulated. It is also applied on domestic enterprises in SEZs. Elsewhere, domestic enterprises are subject to a 55 percent corporate income tax. However, in practice tax paid is based on negotiated tax contracts.

61

Under certain conditions, goods manufactured in the SEZs can be sold in other areas of the country provided full payment of import duties and indirect taxes is made. Domestic enterprises operating in the SEZs need government approval to enjoy these advantages.

62

However, according to the customs data (which may include exports originating in other parts of China), the value of their exports, including Hainan province, reached $9.6 billion in 1991 or 13.4 percent of China’s total.

63

Considerable variation is found in the data derived from various sources on open economic zones. An extended time series of industrial output at constant prices is not available.

64

A summary of incentives offered in selected countries appears in Table 11.

65

The maximum area of land to be leased for development is 30 square kilometers at a time. The land use rights can be leased out, mortgaged, or used as equity contribution in setting up a joint venture.

66

See SRI International Associates Program, China’s Regions Emerge (Beijing, September 1992), p. 13.

67

From north to south, Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai. Ningbo. Wenzhou, Fuzhou, Guangzhou, Zhanjian, and Beihai.

68

In 1984, this limit was set at $10 million for Dalian and $30 million for Tianjin and Shanghai.

69

The statistics also refer to the total exports of each open coastal city, and not to that of the ETDZ, which could have witnessed a considerably higher growth rate.

70

Currcntly the market is physically in the older western part of Shanghai, but the intention is to move it to Pudong.

71

Enterprises in Hainan do not have to apply for tax exemptions once their projects have been approved, whereas in Pudong they must apply separately for tax-exempt status.

72

Official estimates of GNP point to growth of about 14 percent in 1991 compared with 7.7 percent for China as a whole.

73

Prices for land use rights were fixed by the Shanghai government: $900 a square meter for the first tract of land for nonindustrial use, but the price for industrial development was held to $100 a square meter. In both cases the term was for 50 years.

74

Inland provinces are all provinces not considered coastal provinces. The coastal provinces are Liaoning, Tianjin, Hebei, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong, Guangxi, and Hainan.

75

The external trade of the inland provinces may be underestimated by the statistics, which tend to report transactions according to the location of foreign trading corporations that handle the trade rather than the producing enterprises that are often located in inland provinces.

76

This rate is double that applied in SEZs and ETDZs, as well as on targeted projects in other parts of the 14 open coastal cities.

77

Unlike the OEZs where the project approval limit was $30 million, the inland provincial authorities could approve projects only up to $5 million.

78

The ten cities are Nanjing and Zhejian (Jiangsu province); Wuhu, Tanglin, Angin, and Maanshang (Anhui province); Jiujiang (Jiangxi province); Yueyan (Hunan province); Wuhan (Hubei province); and Chongqing (Sichuan province). The six zones are Shanghai-Nanjing zone, the Wuhan development zone, the Hunan-Hubei-Jiangxi zone, the Chongqing-Yichang zone, the Wujiang hydropower and mineral resource development zone, and the Panxi-Luipanshui comprehensive resource development zone.

79

In addition, trade and other economic cooperation between China’s border provinces and Russia, Mongolia, Myanmar. India, and Viet Nam are being encouraged, and many administrative restrictions are being eliminated. Many provinces also announced their own plans to open more border cities.

80

Estimates of newly opened development zones since the beginning of 1992 at and above county level reached 1,800, and the number of zones at all levels (including township and village) was as high as 9.000.

81

As explained in Section II. the state sector consists of SOEs owned by the central and provincial authorities, whereas the nonstate sector comprises collectives, private enterprises, and foreign-funded enterprises.

82

Defined as standard deviation/mean and designed to measure the extent of dispersion among observations in two or more series with different means. Low values reflect a less diverse or more homogeneous set of observations.

83

A similar phenomenon can be observed in other nonstate industry. In 1991, the 12 coastal provinces and municipalities accounted for over 70 percent of total industrial output by domestic private enterprises and “other” (mainly foreign-funded) enterprises, while the 9 western provinces and autonomous regions accounted for only 8 percent.

84

Ma and Kim (1992) compare the performance of the SOEs and TVEs using a Tornqvist-Theil TFP index (in which input shares are averaged by data at the beginning and end periods). Between 1978 and 1990, the TFP average annual growth rate of the TVEs was 9.1 percent, compared with 1.0 percent for the SOEs.

85

The statistical analysis in this section is based largely on data for 1990, the most recent year for which comparable cross-province data are available. Subsequent developments and policy shifts are likely to have caused some, possibly major, changes in certain variables discussed here.

86

Li, Li, and Ma (1989), Oksenberg and Tong (1991), and World Bank (1993b) have described in detail the evolution of China’s center-local fiscal relations since 1980.

87

These contracts apply only to that part of revenue shared between the center and local governments. Three provinces (Shanghai, Heilongjiang, and Jiangsu) still provide the lion’s share of the budgetary surpluses. Guangdong is notable among the higher-income provinces in running a deficit.

88

An example of this is provided by Hetian province, which in 1990 was contracted to transfer Y 1.4 billion to the center out of total collections of Y 8.4 billion. However, this amount was reduced by additional subsidies for enterprise losses (including foreign trading corporations) and grain, disaster relief, and additional capital construction. In the end, the central government transferred Y 0.4 billion to Henan (sec World Bank, 1993a).

89

In addition, there are two comprehensive banks, an ever-increasing number of nonbank financial institutions, and a large network of” rural credit cooperatives (whose supervision is delegated to the Agricultural Bank of China) and urban credit cooperatives.

90

See World Bank (1990b) for a more complete description of” the institutional characteristics of the Chinese banking system.

91

The financial balance in Chart 4 is the difference between the absolute increase in deposits and credit expansion during the year. The exceptionally large surplus in Beijing indicates that many enterprises maintain funds in their headquarters.

92

A more complete description of the evolution of China’s external trade system may be found in Lardy (1992) and Panagariya (1991).

93

There are 13 provinces that have neither a coastline nor any border with neighboring countries.

94

Jilin, Heilongjiang, Inner Mongolia, Xinjiang, Gansu, Tibet, Yunnan, and Guangxi. Although Liaoning borders the Democratic People’s Republic of Korea, since it has a longer coastal line than a border line, it is classified here as a coastal province.

96

Perkins (1988) estimates that productivity growth accounted for over 40 percent of total growth in real net material product between 1977 and 1985, whereas growth in the labor force and in the capital stock accounted for the remainder.

97

The output of TVEs was included in this aggregate until 1984.

98

Lin (1992) examines the relative importance of various components of the reform on agricultural growth in China between 1978 and 1984. He finds that the dominant source of output growth was the shift from the production team system to the household responsibility system (HRS). Changes in procurement and market prices, as well as the improved availability of fertilizers and other inputs, also had a significant impact on output growth.

100

The calculation of GNP in U.S. dollars is based on the official exchange rate.

101

This index is defined as H⁢= 100Xi2X where Xi = exports of ith commodity and X = total exports of China.

102

Many enterprises belong to investors in Taiwan Province of China and other countries in Southeast Asia that are listed in Hong Kong.

103

Exports have certainly been the main objective of China’s recent efforts to open its economy to the rest of the world.

104

These ratios tend to overstate the degree of openness of the Chinese economy because they are based on the official exchange rate of the domestic currency.

105

As an exception, Shanghai was authorized in 1992 to issue bonds for the specific purpose of developing the Pudong New Area.

106

These local bonds have been in use for some years, albeit on a relatively limited level. They have sometimes been used to finance infrastructure. Many local enterprises have also issued their own bonds.

107

This section draws on Khor (1991).

108

In two of the cycles in which external imbalances were pronounced. China made use of IMF resources (first credit tranche stand-by arrangements in 1981 and 1986).

109

The effectiveness of the credit plan, in its present form, has been greatly diminished by both the growing disintermediation and the rising amount of credit being created by NBFls outside the credit plan.

110

Since industrial production deflators are not available at the provincial level, province-wise retail price indices are used to deflate nominal industrial growth rates.

111

A variant of the regression equation above is used in estimating the impact of a change in the revenue-sharing schedule on Guangdong’s economic growth. The equation is

GR=15.60−0.071ONS+11.43LTI−1.383SRR−2.262EXR−2.658IMR+6.522FCR−0.0022PNI(16.59)(−2.72)(5.14)(−2.30)(−0.73)(−0.69)(1.64)(−2.78)

R2=0.896,N=28,DF=21.

In the regression, the annual average growth rate of per capita national income during 1981–90 is chosen as the dependent variable, GR. ONS is the share of state-owned industrial output in total industrial output, SRR is the approximate share of revenue submitted to the center, EXR is the ratio of exports to GNP, IMR is the ratio of imports to GNP, FCR is the ratio of foreign capital actually utilized to total fixed asset investment, and PNI is the per capita income level in the initial year, 1981.

Cited By

Cover China at the Threshold of a Market Economy
China at the Threshold of a Market Economy
Author: Mr. Michael W. Bell, Ms. Kalpana Kochhar, and Hoe Ee Khor
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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