Carsten A. Holz

Spatial Price Differences in China: Estimates and Implications

Prices differ across space: from province to province, from rural (or urban) areas in one province to rural (or urban) areas in another province, and from rural to urban areas within one province. Systematic differences in prices across a range of goods and services in different localities imply regional differences in the costs of living. If high‐income provinces also have high costs of living and low‐income provinces have low costs of living, the use of nominal income measures in explaining such economic outcomes as inequality can lead to misinterpretations. Income should be adjusted for costs of living. We are interested in the sign and magnitude of the adjustments needed, their changes over time, and their impact on economic outcomes in China. In this article, we construct a set of (rural, urban, total) provincial‐level spatial price deflators for the years 1984–2004 that can be used to obtain provincial‐level income measures adjusted for purchasing power. We provide illustrations of the significant effect of ignoring spatial price differences in the analysis of China’s economy.

China's Economic Growth 1978-2025: What We Know Today about China's Economic Growth Tomorrow

Summary This paper examines Chinas future growth prospects and the potential drivers of future growth using two approaches. It first asks in how far Chinas recent economic development matches standard growth patterns identified in development economics and trade theory. Second, GDP is decomposed into income components, which in turn are explained, for the reform period, by the quantity and quality of labor; future GDP can then be re-composed from future labor data available today. Overall, Chinas economic growth is likely to continue at current rates through 2015 before it gradually slows. Such a growth has numerous implications.

“Fast, Clear and Accurate”: How Reliable Are Chinese Output and Economic Growth Statistics?

Chinas statistics are widely viewed as unreliable, with data falsification in order to meet economic growth targets increasingly the norm. This report examines some of the most recent criticism of statistics on Chinas industrial value-added and Gross Domestic Product, and shows this criticism to be unfounded as it is based on misunderstandings about the meaning and coverage of particular data. A lack of evidence on data falsification does not mean that Chinas statistical system is necessarily honest in its statistical reporting, but recent developments in Chinas statistical system further suggest that data falsification at the higher levels of the statistical bureaucracy is unlikely. Nevertheless, even if data are not being purposefully falsified by the National Bureau of Statistics, the margin of error in much of the published data is likely to be sufficiently large to allow the statistical authority a choice of final value from a relatively wide range of equally correct values.

China's Reform Period Economic Growth: How Reliable are Angus Maddison's Estimates?

Chinese economic growth statistics are controversial. In recent years they have been challenged on technical grounds as well as on suspicions of data falsification. Angus Maddison in a 1998 OECD study goes further in that he questions Chinas long-run growth statistics and proceeds to provide an alternative time series. His average annual real GDP growth rate for China in the reform period (1978 through 1995) is 2.39 percentage points below the official one. Angus Maddisons revisions were subsequently incorporated into the Penn World Tables; his GDP estimates for China, thus, have found their way into numerous cross-country studies. This paper critically examines the validity of Angus Maddisons revisions to official data.

No Razor's Edge: Reexamining Alwyn Young's Evidence for Increasing Inter-Provincial Trade Barriers in China

Alwyn Young (2000) argues that barriers to interprovincial trade in China have increased during the reform period. This paper critically examines each of his five arguments and the evidence he presents. In all five instances, the argument is problematic and the evidence not robust. A comparison with the United States shows the Chinese evidence to be well within the range of that of a normal, relatively integrated large economy. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

China's 2004 economic census and 2006 benchmark revision of GDP statistics: More questions than answers?

In 2006, China’s National Bureau of Statistics undertook a benchmark revision of national income and product accounts statistics based on the findings of the 2004 economic census. The benchmark revision covers primarily the years 1993-2004 with revised economy-wide and sectoral output values. The new data have three implications. (i) Despite all the hype only a few years ago about data falsification by local statistical authorities in China, the 2004 economic census results validate the provincial aggregate output values and invalidate the center’s national ones. (ii) At the national level, economy-wide as well as sectoral nominal values were revised but real growth rates of some sectors remained unchanged. That is not plausible, and implies that at least the secondary sector real growth rates are erroneous. (iii) The benchmark revision raises questions about the quality and meaning of a large body of official statistics. Ultimately, it casts doubt on the professionalism and sincerity of China’s statistical authority.

Long live China’s state-owned enterprises: deflating the myth of poor financial performance

Abstract China’s industrial state-owned enterprises (SOEs) are commonly perceived as performing poorly. This leads authors to conclude that SOE reform so far has been a failure, and to recommend all-out privatization. Industrial SOE profitability indeed declined drastically in the course of the reform period, and industrial SOEs are always less profitable than industrial non-SOEs. However, the gap between SOEs and non-SOEs can be explained by just two factors: SOEs face higher circulation tax rates than non-SOEs, and have a higher capital intensity. In as far as these are the result of government policies and historical factors discriminating against SOEs, privatization of SOEs may improve these enterprises’ profitability levels, but privatization is not a necessary condition. The decline in SOE profitability over time furthermore is well explained by economic transition factors; non-SOE profitability declined following a similar time pattern, and non-SOEs are no better suited to withstand shocks such as the 1989–1990 economic downturn.

The 1997–1998 break in industrial statistics: Facts and appraisal

Abstract In 1998, the National Bureau of Statistics (NBS) in the published industrial statistics modified the scope of enterprises covered and the enterprise classification system. This paper highlights the modifications and identifies two implications. First, the use of a proportional allocation rule in data aggregation boosts the size of “public ownership,” an important cornerstone of socialism. Second, the switch from compiling detailed statistics on enterprises identified by an administrative criterion to enterprises that exceed a fixed volume of sales revenue poses new difficulties for comparative data analysis but also represents a change in statistical practice that may yet lead to data of better quality.

The impact of the liability–asset ratio on profitability in China's industrial state-owned enterprises

Abstract The liability–asset ratio of Chinas industrial state-owned enterprises (SOEs) has increased dramatically in the course of the economic reform period. Western observers point out the inherent dangers to enterprise solvency. Chinese policymakers view todays level as exceedingly detrimental to enterprise profitability and are introducing measures to reduce it. Yet the increase in the liability–asset ratio of industrial SOEs is the inevitable result of systemic changes; since the early 1990s, the liability–asset ratio has stabilized. The perceived negative impact of the current level of the liability–asset ratio on enterprise profitability does not hold up in regression analysis. It is true that low-profitability SOEs tend to have a high liability–asset ratio, perhaps due to government-ordained support through bank loans. However, once the endogeneity of the liability–asset ratio is controlled for, a high liability–asset ratio tends to imply a high level of profitability. This suggests that current industrial SOE reforms in China that focus on debt alleviation are misguided.

China's industrial state-owned enterprises : between profitability and bankruptcy

Explaining the Reform Period Decline in Industrial SOE Profitability: - Tracing the Decline in Industrial SOE Profitability Through the Profit and Loss Account - The Impact of Competition and Labor Remuneration on Profitability - The Impact of the Liability-Asset Ratio on Profitability - Industrial SOE Profitability in Perspective: - SOEs versus Non-SOEs - Profitability Across Industrial SOEs - Recent Industrial SOE Reform Policies