Harry X. Wu

The Chinese GDP Growth Rate Puzzle: How Fast Has the Chinese Economy Grown?

The Chinese statistical authorities recently revised the Chinese GDP level and real growth rate for the period 19932004 following Chinas first national economic census for 2004. However, the methodology used in their revision is opaque. Using a trend- deviation interpolation approach, this study has managed to replicate the basic procedures of the revision and reproduced the official estimates. Through this exercise, we have found that the estimates that could be obtained by the straightforward interpolation procedures were significantly modified. Based on a political economy argument, we attempt to explain why the revision had to leave the growth rate of 1998 intact and why it had to bypass the price issue and directly work on the real growth rate revision. Based on previous studies and other observations, we also question the census results on non-service industries.

Rural enterprises in China.

List of Figures - List of Maps - List of Tables - Acknowledgements - List of Abbreviations - Notes on Contributors - Introduction - Rural Enterprise Growth in A Partially Reformed Chinese Economy C.Chunlai, C.Findlay, A.Watson & Z.Xiaohe - Private Enterprises and Local Government in Rural China S.Young & Y.Gang - Rural Enterprise Contributions to Growth and Structural Change H.X.Wu - Regional Disparities in Rural Enterprise Growth A.Watson & H.X.Wu - Capital Formation in Rural Enterprises Y.Peng - The Rural Industrial Enterprise Workforce H.X.Wu - Rural Enterprise Productivity and Efficiency H.X.Wu & W.Yanrui - Rural Enterprises in China: Overview and Issues C.Findlay, A.Watson & H.X.Wu - Bibliography - Index

How Fast Has Chinese Industry Grown?--Measuring the Real Output of Chinese Industry, 1949-97

The motivation of this study is to test the widely accepted but never tested hypothesis that Chinese official statistics on growth rates may contain serious upward biases. By adopting a Laspeyres quantity index approach to the recently available official physical output data at commodity level, we have constructed an independent output index for Chinese industry, and produced a unique data set for the value added of 17 major industrial branches at 1987 prices for the period 1949–97. This study has, for the first time, systematically tested this hypothesis with supportive results. It implies that any growth accounting study using the official growth rates may have exaggerated the productivity performance of Chinese industry.

China's comparative labour productivity performance in manufacturing, 1952–1997: Catching up or falling behind?

Abstract This study joins the debate of whether Chinese manufacturing has experienced a significant catch-up with or a process of falling behind the worlds advanced economies. It calculates a new set of industry-of-origin, China–US purchasing power parities (PPPs) for major manufacturing industries at 1987 prices. Then, using a newly constructed data set, it derives Chinas comparative labour productivity level in manufacturing for 1952–1997. The results show that Chinas comparative labour productivity increased from about 3.0 in 1952 to 7.6 in 1997 (USA=100), but with a long period of stagnation at around 4.5 between 1958 and 1990. A clear catch-up process has been observed since the beginning of 1990s when Chinas market-oriented reform deepened.

MORE COSTLY OR MORE PRODUCTIVE? MEASURING CHANGES IN COMPETITIVENESS IN MANUFACTURING ACROSS REGIONS IN CHINA

Using a newly constructed industry-by-region dataset based on Chinas two censuses, this paper examines the trend of average labor compensation (ALC), labor productivity (ALP) and unit labor cost (ULC) in 28 manufacturing industries across 29 provinces in China for 1995 and 2004. Findings show that at the aggregate level, ALP growth was generally faster than that of ALC and hence resulted in a significant decline in ULC for all regions in China. Furthermore, less developed regions exhibited stronger productivity growth relative to labor cost increase than more developed regions, thus leading to a convergence in ULC levels across provinces and regions over this period. Comparing individual industries, we observe a substantial variation in growth rates and convergence trends across regions. Logit regression analysis confirms that labor-intensive industries are more likely to converge in ALP, ALC and ULC, whereas capital/skill-intensive industries tended to diverge. This finding is further confirmed by estimating a convergence regression, which suggests that misallocation of resources due to market imperfections or institutional barriers is likely to be the main factor behind the divergence of ULC.

Banking Structure, Labor Intensity, and Industrial Growth: Evidence from China

While China has seen rapid economic growth over the last three decades, many studies document a negative correlation between traditional measurements of banking development and economic growth in China. Among many efforts to explain the low efficiency of Chinese banking sector, two arguments focus on the dominance of the four big state-owned banks but they emphasize different facets of the “Big Four.” The ownership-structure view argues that the state ownership of the largest banks and corresponding government interventions in capital allocation should be responsible for the bad performance of the banking sector. The size-structure view states that it is the improper size structure of the banking sector that leads to its low efficiency. This paper aims to empirically disentangle these two different explanations. With data on the banking sector and 28 manufacturing sectors in 30 provinces of mainland China over the period 1999-2007, this paper investigates the differential effects of banking structure on the growth rates of different industries. In order to identify the channel through which banking structure affects industrial growth, the paper constructs two interaction variables: interaction between labor intensity of each industry and banking structure at each province, interaction between the share of non-state-owned firms and banking structure. To capture the purely technological feature of each industry, the paper uses the labor-capital ratio of each U.S. manufacturing sector as a proxy for labor intensity of the corresponding Chinese manufacturing industry. We find that more labor-intensive industries grow faster than more capital-intensive industries in provinces with more active small banks, compared to provinces with more dominant Big Four branches. These results are robust to alternative measures of labor intensity. But the interaction variable used to capture the ownership-structure view is not significant in all the regressions. Thus the results are consistent with the size-structure view while not support the ownership-structure argument.

Rural Enterprise Growth and Efficiency

Chapter 3 focused on estimation of the GDP growth of the rural and urban economies, and on the role of rural enterprises in growth and structural change. It did not assess and compare the efficiency performance of China’s rural and urban economies during the reform period. As a result, the sources of the economic growth in the two sectors of China’s economy have not been identified. It is not clear to what extent the growth was due to the expansion of labour and capital inputs, and to what extent the growth was attributable to changes in factor combinations, scale economies and technology, and institutional and managerial arrangements. Answering this question requires analysis of the efficiency of both China’s rural and urban economies.

Regional Disparities in Rural Enterprise Growth

In Chapter 1 it was argued that the origins of the dramatic growth in rural enterprises in China after 1978 can be traced to three main factors: the management reforms associated with the reintroduction of household farming, the increase in agricultural product prices, and the development of a free market system. The first of these transformed the management of labour and the incentives for household farming, liberalising controls over land and labour use and precipitating the surplus labour available for other employment that had been hidden within the collective system. The second raised the profitability of agricultural production and stimulated rapid growth in output. This increased the amount of capital available in the countryside, which could then be used for investment in even more profitable non-agricultural enterprises. The third factor formed the exchange mechanism for both the inputs for rural enterprises and for their products, thereby providing the stimulus for growth. Alongside these fundamental changes affecting the supply of labour, capital and raw materials, other changes in administrative systems and the introduction of fiscal contracting created a strong sense of local economic identity. This crystallisation of economic interests made the development of local enterprises a priority for all levels of government.

How fast has Chinese industry grown? – The upward bias hypothesis revisited

This study addresses two potential problems when single-benchmark price weights are applied to commodity indicators to assess the official estimates of China’s industrial growth, i.e., the substitution bias and the constant value-added ratio given by a fixed input–output table. It introduces the 2002 and 2007 input–output tables and price weights in order to capture changes in a more market-based pricing and more liberal policy environment following China’s WTO entry. My new findings have not only lent a further and stronger support to the upward-bias hypothesis but also confirmed the Maddison–Wu conjecture (2008) that official estimates tend to smooth out high-growth volatility. By the alternative index, the impact of external shocks to Chinese industry appears to be more pronounced than the official index.

Rural Enterprises in China: Overview, Issues and Prospects

In the period since the reforms began, the Chinese economy has become one of the fastest-growing in the world. Between 1978 and the early 1990s, it grew at an annual average rate in real terms of nearly 9 per cent. By far the fastest growing elements were rural enterprises. Their industrial output grew by nearly 17 per cent a year, and their output of services grew by over 19 per cent a year. Urban enterprise output of the corresponding sectors grew at the same rate or slightly slower than national GDP. Agriculture on average grew more slowly, at about 5 per cent per year in real terms. These differing growth rates transformed the Chinese economy, creating significant changes in the structure of output and employment.