Yuk-shing Cheng

A decomposition analysis of income inequality of Chinese rural households

Abstract This paper reports an application of household survey data collected from grain producing areas in five provinces of China to issues of the determinants of rural inequality. Previous studies suggest that non-agricultural activities have been the major cause of rural income inequality, which has important implications for policy formulation. However, our results show that inequality within the grain producing areas was also very high, with differences in crop income as the major source of inequality. The policy implications are also different from those of previous studies. While some suggest that an increase in agricultural income can reduce inequality, our results indicate that this is not universally true. In some cases, whether the increase in crop income has come from state procurement also matters. These results call for a more cautious and area-specific approach to policy formulation as far as inequality is concerned.

Solving the puzzles of structural efficiency

Abstract Since the concept of “structural efficiency” first appeared in Farrell [Farrell, M.J., 1957. The measurement of productive efficiency. Journal of the Royal Statistical Society, Series A, Part III 120, 253–281], attempts have been made to derive measures for the performance of a group of production units (often referred to an industry with many firms). Many empirical studies used the technical efficiency of an average unit to measure the structural efficiency of a group, but researchers have been puzzled by the discrepancies between the average of individual efficiency scores and the performance of the group as a whole. In this paper, we point out that the “shadow price model” provides a useful framework for understanding the economic meaning of the structural efficiency as well as its components. By recognizing these components, the puzzles related to the inconsistencies between the individual and group performance can be solved readily.

Explaining the Financial Performance of China's Industrial Enterprises: Beyond the Competition-Ownership Controversy

Scholarly explanations of the worsening financial performance of Chinese industry over the reform era, particularly the loss-making phenomenon, have coalesced around two rival stories: the “inefficient institutions causing poor financial performance” story and the “increased competition inducing profitability decline” story. This article critically reviews the arguments and empirical substantiation of the two stories, and gives an alternative explanation that takes demand conditions and industrial configurations into the analysis. On this basis, it is argued that the worsening financial performance is a macro as well as micro problem that points to the fundamental contradictions in contemporary Chinese political economy. Some policy implications from this analysis are raised in the concluding section. Chinese prime minister Zhu Rongji pledged to solve the problem of loss-making by the country’s state-owned industrial enterprises within a period of three years when he took up office in March 1998. The fact that he put this as the number one task of his new administration clearly reflects the severity of the problem. A quick glance at the relevant statistics suffices to impress that this is the case. As is indicated in Figure 1, by 1997, total losses as a ratio of the net output of all industrial enterprises was more than three times the ratio in 1980, increasing from 2.43 to 8.24 per cent. The increase in the incidence of loss-making is even more alarming: almost one-fourth of all enterprises suffered from losses by 1997, compared with the ratio of one-eighth in 1980. Table 1 further indicates that loss-making enterprises, whilst accounting for 25–30 per cent of the productive inputs of Chinese industry, turn out only 10 per cent of total output. And amid keeping idle their productive inputs, loss-making enterprises still have to pay for the amount of wages and staff welfare costs commensurable to their input scales. * The draft of this article was completed during Yuk-shing Cheng’s research visit to the School of Oriental and African Studies, University of London. The paper has been subsequently presented at conferences in Cambridge and Beijing. The authors wish particularly to thank Thomas M.H. Chan for his comments on an earlier version. 1. Figures cover all township and above independently accounting industrial enterprises (TAIAIEs). It is for these enterprises that China’s statistical authorities have published consistent data of financial performance, and economic and technical data. The main data series analysed in this article include those of output and losses. The authorities have published aggregate data of net output value for all TAIAIEs for 1980–92 and those of industrial value-added for 1992–97. The same applies to SOEs at this level. For the disaggregated, sector-level output data, what are available are net output data for all TAIAIEs for 1980 and 1984–92 and industrial value-added data for 1992–97. Much less is available for SOEs by industrial sectors: only net output data for 1991 and industrial value-added data for 1992–97. As for losses, there are aggregate data for TAIAIEs and SOEs for 1980–97, as well as uf6d9 The China Quarterly, 2002 414 The China Quarterly Figure 1: The Incidence and Scale of Loss-Making, 1980–1997 Sources: State Statistical Bureau, Zhongguo tongji nianjian (China Statistical Yearbook) and Zhongguo tongji zhaiyo (China Statistical Abstract) (Beijing: Zhongguo tongji chubanshe), various issues. The deteriorating financial performance has thus become a serious policy concern. It is likely to damage the developmental potentials of enterprises, and to dampen the incentive to invest in technical renovation and upgrading for Chinese industry as a whole. These, in turn, will put Chinese industry in a disadvantageous position in the face of market opening and globalized competition. More immediately, against the background of East Asia’s financial and economic crisis in the closing years of the century, the deteriorating financial performance of Chinese industry has given rise to the speculation as to whether a similar crisis will occur in the country. For, as is well known in the relevant literature, an influential explanation of the East Asian crisis has it that the crisis stemmed mainly from accumulated problems in the real economy – which dragged the financial sector and thereby the macroeconomic conditions into trouble, thus providing room for speculative attacks on the currencies and domestic assets. In the case of China, diagnoses of the economic conditions in this spirit were in vogue among Western media, consultant companies and economists. It was asserted that, because of

China's grain marketing system reform in 1993-1994: empirical evidence from a rural household survey

Abstract By utilizing a rural household survey, this paper domonstrates the progress in Chinas grain marketing reform in 1993 and evaluates to what extent the reform was reversed in 1994. Specifically, we investigate the degree of commercialization, changes in states contract procurement quota and changes in the marketing channels. Overall, the grain market has been liberalized to a very large extent. Participation of the private traders have already grown to a significant level, occupying more than one-third of the market share for wheat and rice and more than half for maize. For minor crops, the share of private traders were even bigger. Despite the reversal in 1994, the grain market was still very “open.” Counting all grain types, the state was controlling only about one-third of the marketed surplus. However, if the central leadership perceived any serious instability in the market for a certain grain, examples provided illustrate how the states control could certainly be strengthened significantly.

China's Reform of Rural Credit Cooperatives: Progress and Limitations

Yuk-shing Cheng, Department of Economics, Hong Kong Baptist University, Renfrew Road, Kowloon Tong, Kowloon, Hong Kong. E-mail: ycheng@hkbu.edu.hk; tel.: (852) 3411 7550; fax: (852) 3411 5580. The author thanks Enjiang Cheng for numerous discussions on this topic in the past few years. Charles Kwong and Harry Lo have provided constructive comments on an earlier draft of the article. All remaining errors are the author’s own. YUK-SHING CHENG

Hong Kong's economic relationship with China

Abstract The Hong Kong‐China relationship has been driven by the complementarity between the two economies, by Hong Kongs entrepot role and by the relocation of Hong Kong firms into southern China. We argue here that the relationship is entering a new phase. Hong Kong will remain a highly competitive supplier of entrepot services to China, despite the success of the open‐door policy. However, the regional focus of Hong Kongs investment in China is set to broaden. The sectoral focus of Hong Kongs trade with China is also set to widen. There is, however, some debate in both Hong Kong and China, Guangdong in particular, about the appropriate industry policy settings in this relationship. The argument of this paper is that Hong Kong continues to offer highly competitive intermediary services to China and that the changing competitiveness in Guangdong offers a new set of opportunities to Hong Kong which will actually lead it to a deeper economic relationship with China in terms of its regional focus and sec...

Reforms of the Agricultural Bank of China

This paper investigates the evolution of the ABC, from its reestablishment in 1979 as a state bank to the announcement of shareholding reform toward the end of 2008. The ambivalence of the government in reforming the ABC and the limitations of the reforms are studied. The concluding analysis examines the meanings and implications of the reforms and discusses how the ABC has been finding ways, by means of local experiments, to reconcile policy and commercial objectives.

Designing property rights over land in rural China

After nearly four decades, Chinas rural land tenure arrangement remains by and large how it looked like at the beginning of the economic reform. Rural land remains collectively owned. Peasants contract land from collectives, with their tenure insecure, and their transfer rights restricted. If such an arrangement was deemed a historical legacy at the beginning of the reform, it now looks more and more like a constrained efficient design by historical accident. This article suggests the constraints against which this design may be constrained efficient, and provides a stylised model that matches a wide array of empirical patterns.

Econometric Analysis of Monthly Peak-Hour and Total Usage Patterns of Hong Kong’s Cross-Harbor Tunnels

As one of the most densely populated metropolises in the world, Hong Kong daily sees severe traffic delays at the Cross-Harbour Tunnel (CHT), though not at the Eastern Harbour Crossing (EHC) or the Western Harbour Crossing (WHC). In 2013, the Hong Kong Special Administrative Region (HKSAR) Government proposed raising the tolls of the publicly owned CHT and lowering those of the publicly owned EHC for nine vehicle types: private cars, motorcycles, taxis, three kinds of buses, and three kinds of goods vehicles. The privately owned WHC’s already high tolls, however, would remain unchanged. Using monthly usage and peak-hour usage data for January 2003 through June 2015, a Generalized Leontief demand system was estimated and found that private cars, motorcycles, and goods vehicles have price-sensitive tunnel usage patterns that are also time-dependent. The usage patterns of taxis and buses, which are public transportation vehicles, are totally price-insensitive. These findings suggest that the HKSAR Government’s proposed toll changes would reduce the CHT’s monthly usage by 7.4%–12.2%, and peak-hour usage by 5.0–16.8%. These usage reduction estimates suggest that a time-of-use (TOU) toll design can better manage CHT congestion than the current non-TOU design.