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An Analysis of the Determinants of Provincial-Level Performance in China's Economy

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Abstract

This paper examines the determinants of the national-and provincial-level performance in post-reform China. Using panel data, we find that both capital accumulation and the total factor productivity (TFP) improvement play an important role in the rapid growth of the Chinese economy since the inception of the reform and the open-door policy. After analysing the growth performance of each group for both the whole period and the sub-periods, we empirically find that there exist different growth patterns for each group. This paper also studies the determinants of TFP in contemporary China.

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Notes

  1. Data for a few years are filled in by linear interpolation because of lack of the data for these years.

  2. According to Young, four main reasons that led the newly industrialised countries (NICs) of East Asia, that is, Hong Kong, Singapore, South Korea, and Taiwan, to grow with the extraordinarily rapid and sustained growth of output per capita were the rapid rising of participation rates, educational levels, investment rates (except Hong Kong), and a large intersectoral transfer of labour into manufacturing sector.

  3. In order to derive the real investment it is necessary to construct an investment deflator. The official deflator for gross fixed capital formation (GFCF) is one of the alternatives although it is interrogated by such researchers as Young (2000). The price index for fixed asset investment is the most ideal alternative. Unfortunately, this index in China has not been compiled until the 1990s; Jefferson et al. (1989) suggested that one might neglect the changes in investment goods prices prior to 1980. However, this obviously does not meet the case for the post-reform of China. Chow (1993, 2002), via the relation among national income, consumption, and accumulation, constructed an implicit deflator to deflate the accumulation. Hu and Khan (1997) used different deflators for different periods to form the deflator series (An implicit deflator based on the estimation by Chow (1993) was used for the period prior to 1978; the price series of building materials are adopted for the period 1978–1990; the fixed assets price series are used for the period 1991–1994.) Hsueh and Li (1999) suggest the use of the price index of output value for construction industry and producer price index of mechanical products via the weighted average method to form the price index for the gross fixed capital formation (GFCF). Young (2000) constructs an implicit fixed asset formation deflator as a residual between GDP deflator and the deflators of other components of GDP including private consumption, government consumption, inventories, and import and export. Wang and Yao (2001) question the accuracy of Young's method. The price index in this paper was based on the method suggested by Chow (1993, 2002).

  4. In order to reduce the impact of the initial capital stock on the calculation of the capital stock as much as possible, we, in fact, have calculated the capital stock from 1979 to 2000, even though the capital stock data used in the growth accounting model are from 1980 to 2000.

  5. Self-employed individuals accounted for only 7.1% by 2000 (CSY, pp. 110–111), which is fairly low.

  6. Hsueh and Li (1999) do not provide the data of the aggregate share of labour; we simply took the average of provincial labour shares to obtain the national labour share.

  7. The three regions are composed of the following provinces, municipalities, and autonomous regions, respectively. The east region includes Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Guangxi, Hainan. The middle region includes Shanxi, Inner Mongolia, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei and Hunan. The rest of provinces are included in the west region.

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Acknowledgements

We are greatly indebted to three anonymous referees and Shingo Takagi for their valuable comments and suggestions. We especially thank Jeffrey B Miller (the editor of this journal) both for his helpful comments and for his patient and detailed editing of the paper. We also thank Xiang Fang for his help in revisions on earlier versions and Chi Han for his comments. All remaining errors and omissions are our own responsibility.

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Authors and Affiliations

  1. College of Economics, Osaka Prefecture University, 1-1,Gakuen-Cho, Sakai, 599-8531, Osaka, Japan

    Katsuhiro Miyamoto & Huangjin Liu

  2. School of Economics and Management, Nanjing University of Science and Technology, 200 Xiaolingwei, Nanjing, 210094, Jiangsu, China

    Huangjin Liu

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  1. Katsuhiro Miyamoto
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Miyamoto, K., Liu, H. An Analysis of the Determinants of Provincial-Level Performance in China's Economy. Comp Econ Stud 47, 520–542 (2005). https://doi.org/10.1057/palgrave.ces.8100056

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