Shujie Yao

On economic growth, FDI and exports in China

China has achieved high economic growth for a prolonged period of time. Academic researchers have tried alternative explanations for this miraculous growth. This study focuses on the effect of exports and foreign direct investments (FDI) on economic performance, using a large panel data set encompassing 28 Chinese provinces over the period 1978–2000. Adopting Pedronis panel unit root test and Arellano and Bonds dynamic panel data estimating technique, it is found that both exports and FDI have a strong and positive effect on economic growth. The results suggest that two development policies adopted in China are useful for other developing and transitional economies: export promotion and adoption of world technology and business practices.

Regional Growth in China Under Economic Reforms

This article uses both cross-section and panel data approaches to study regional growth in China. Inter-regional income inequality increased ((divergence), the rich regions became richer but poor regions poorer (b divergence), over the data period 1978-95. This contradicts results from other cross-region country studies shown by Sala-i-Martin [1996] and some earlier studies on China. Only after controlling for regional effects, population growth, and investment in both physical and human capital do the data show significant b-convergence. More interestingly, the degree of openness and transportation are two other important factors responsible for differences in regional growth. This finding has important implications for regional development policy.

Economic growth, income inequality and poverty in china under economic reforms

Chinas gross domestic product (GDP) more than quadrupled between 1978 and 1996 under economic reforms. Per capita disposable incomes more than tripled in the cities and almost quadrupled in the rural areas. However, rapid economic growth brought about large income inequality which slowed down poverty reduction. In 1995, there were still 70-170 million people living in poverty. This article aims to assess the relationship between economic growth, income inequality and poverty using both secondary and household survey data. The main findings are (1) urban/rural divide and spatial inequality are two major factors accounting for overall income inequality; (2) non-wage and non-farm incomes are more unequally distributed than wage and farm incomes; and (3) the incidence of poverty is very sensitive to the changes in per capita income and inequality.

Convergence of China's regional incomes: 1952-1997

This paper employs time series techniques, with or without a structural break, to investigate the question of Chinas regional per capita income convergence. Our results suggest that Chinas regions, especially the eastern and the western regions, have converged to their own specific steady states over the past 40 years. The Gini coefficient, the ratio of per capita income between regions, and the coefficient of variation confirm our findings. We also identify the big shocks on the relative regional per capita income by allowing a time break.

WTO challenges and efficiency of Chinese banks

After joining the World Trade Organisation (WTO) in December 2001, China was given 5 years to completely open up its banking market for international competition. Chinese banks have been renowned for their mounting nonperforming loans and low efficiency. Despite gradual reforms, the banking system is still dominated by state ownership and encapsulated monopolistic control. How to raise efficiency is a key to the survival and success of domestic banks, especially the state-owned commercial banks. Two important factors may be responsible for raising efficiency: ownership reform and hard budget constraints. This article uses a panel data of 22 banks over the period 1995 to 2001, and employs a stochastic frontier production function to investigate the effects of ownership structure and hard budget constraint on efficiency. Empirical results suggest that nonstate banks were 8–18% more efficient than state banks, and that banks facing a harder budget tend to perform better than those heavily capitalized by the state or regional governments. The results shed important light on banking sector reform in China to face the tough challenges after WTO accession.

A Note on the Causal Factors of China's Famine in 1959–1961

where POPt21 is the total population in the previous year; ADR t and EDR t are, respectively, the actual and expected death rates in year t ; and ABR t and EBR t are, respectively, the actual and expected birth rates in year t. Expected death and birth rates are those that would have prevailed if there had been no famine. In other words, the difference between ADR t and EDR t is an increased death rate caused by starvation rather than natural wastage. The difference between ABR t and EBR t is a lost birth rate caused by lost fertility as a result of famine. The data and estimation of the expected growth rate, death rate, and birth rate for the famine period 1959–61 are available from the author on request. The actual growth, death, and birth rates are

Ownership Reform, Foreign Competition, and Efficiency of Chinese Commercial Banks: A Non-Parametric Approach

Since China joined the WTO in 2001, the pressure for bank reforms has mounted as China ought to fully open up its financial market to foreign competition by 2006. Efficiency is key for domestic banks to survive in a liberalised environment, but it appears that the last hope for raising bank efficiency is through ownership reform. Whether ownership reform and foreign competition can solve China’s banking problem remains to be tested. This paper aims to answer this question through using a non-parametric approach to analyse the efficiency changes of 15 large commercial banks during 1998-2005. We find that ownership reform and foreign competition have forced the Chinese commercial banks to improve performance, as their total factor productivity rose by 5.6 per cent per annum. This coincides with the recent bullish Chinese stock markets led by three listed state-owned commercial banks. Despite such encouraging results, we remain cautious about the future of the Chinese banks, as the good results may have been artificially created with massive government support and the fundamentals of the banks may be still weak.

Economic growth in the presence of FDI: the perspective of newly industrializing economies

Although FDI is widely believed to have a positive effect on economic growth, the exact mechanism of how FDI impacts upon the development process of the newly industrialising economies is far from being well understood. This paper presents and tests two propositions on the role of FDI in economic growth from a newly industrialising economys perspective. First, FDI is a mover of production efficiency because it helps reduce the gap between the actual level of production and a steady state production frontier. Second, FDI being embedded with advanced technologies and knowledge is a shifter of the host countrys production frontier. Due to its dual role as a mover of production efficiency and a shifter of production frontier, FDI is a powerful driver of economic growth for a newly industrialising economy to catch up with the worlds most advanced countries. Chinas economic success over the past decades provides an ideal example to test the hypotheses.

Foreign Direct Investment and Regional Inequality in China

Foreign direct investment (FDI) is blamed for being one of the main factors widening regional inequality in Chinese regions since it is highly unevenly distributed spatially. If this logic were true, then controlling the scale of FDI could be a solution to reduce regional inequality. However, it is difficult to reconcile the positive effect of FDI on economic growth with its potential “negative” effect on regional inequality. Using the largest panel dataset covering all the Chinese regions over the entire period 1979–2003 and employing an augmented Cobb–Douglas production function, this paper proves that FDI has been an important factor responsible for regional growth differences in China. However, it suggests that FDI cannot be blamed for rising regional inequality. It is the uneven distribution of FDI instead of FDI itself that has caused regional growth differences. The research results have important policy implications on regional development in China relating to FDI.

Regional economic performance in China

This paper investigates convergence patterns among Chinas provinces using GDP data for the period 1952-97. We analyze convergence behaviour on the basis of Markov chains proposed by Quah (1993) and the generalized entropy decomposition proposed by Shorrocks (1980, 1984). Both sets of results show similar evidence of convergence within the pre-defined geo-economic sub-regions, but no evidence is found of convergence between the sub-regions. This finding has important policy implications for regional economic development in China. Copyright (c)The European Bank for Reconstruction and Development, 2003.