nep-cna New Economics Papers
on China
Issue of 2017‒09‒10
four papers chosen by
Zheng Fang
Ohio State University

  1. Boosting firm dynamism and performance in China By Margit Molnar
  2. Accounting for the Role of Information and Communication Technology in China's Productivity Growth By Harry X. WU; David T. LIANG
  3. Sharing the benefits of China’s growth by providing opportunities to all By Ben Westmore
  4. Lending without creditor rights, collateral, or reputation : The “trusted assistant” loan in 19th century China By Miao, Meng; Guanjie, Niu; Noe, Thomas

  1. By: Margit Molnar
    Abstract: With persisting slower growth worldwide and in China, over-capacity in some heavy industry sectors, declining profitability, and intensifying competition from other, lower-cost emerging economies, corporate behaviour in China needs to change and focus more on efficiency and sustainability. This need is further intensified by mounting environmental pressures and China’s ambition for greener and more sustainable growth. A larger proportion of firms, including state-owned enterprises, should step up innovation efforts and improve corporate governance practices. To this end, supportive policies are needed, fostering an environment that is more conducive to innovation and entrepreneurship, and facilitating resource reallocation through the exit of unviable firms. At the same time, fraudulent corporate practices must be halted and State assets need to be better managed. Reforms are under way or envisaged that will help improve corporate performance and, more broadly, deliver more resilient and environmentally sustainable growth and continuing progress in living standards. This Working Paper relates to the 2017 OECD Economic Survey of China ( y-china.htm).
    Keywords: bankruptcy, business environment, corporate debt, corporate governance, entrepreneurship, industrial policy, Innovation, intellectual property rights, overcapacity, research and development, state-owned entreprise reform, zombie firms
    JEL: G34 G38 L26 L52 O3 P31
    Date: 2017–09–11
  2. By: Harry X. WU; David T. LIANG
    Abstract: Applying the Jorgensonian aggregate production possibility frontier (APPF) model to the China Industrial Productivity (CIP) data set constructed in the principle of KLEMS, we scrutinize the role of information and communication technology (ICT) industries in China's post-reform growth from 1981 to 2012. In the absence of a direct measure of ICT assets, we group Chinese industries into ICT-specific groups following the criteria used in the U.S. case (Jorgenson et al. 2005a), and apply the APPF industry origin of productivity framework, incorporating Domar weights for industry aggregation, to the grouped CIP industry data. This allows us to decompose China's productivity growth into the contribution of the ICT-specific groups and the factor reallocation effect across the groups. Our preliminary results show that Chinese ICT-producing and ICT-using manufacturing industries appear to be the most important driver of China's productivity growth over the entire period in question. While sharing 29% of China's 9.38% annual value added growth, these industries contributed 149% to China's 0.83% annual aggregate total factor productivity (TFP) growth. This, together with a strong gain from the labor reallocation effect across industries, has enabled the economy to compensate for its heavy productivity losses by non-ICT services and the economy-wide misallocation of capital resources.
    Date: 2017–08
  3. By: Ben Westmore
    Abstract: Living standards in China have greatly improved over the past few decades. Both sustained economic growth and an expansion of the social security system have contributed to a sharp reduction in the number of people in poverty. However, urban-rural inequalities remain large and some of the poorest households are being left behind. Further reforms are needed to ensure that the benefits of future growth are shared and that marginalised groups have the opportunity to actively participate in the economy. In particular, policy settings should be adjusted to increase access to good quality education and healthcare for rural and migrant workers and to improve the portability of social security benefits. Changes to the social assistance system that raise work incentives and protect low-income households in poorer locations are also a priority. New spending measures can be funded by adjustments to the tax system which will, in themselves, benefit inclusiveness. This Working Paper relates to the 2017 OECD Economic Survey of China ( y-china.htm).
    Keywords: education, health, inclusive growth, pension system, social assistance policies
    JEL: H55 I14 I24 I30 I38 O53
    Date: 2017–09–11
  4. By: Miao, Meng; Guanjie, Niu; Noe, Thomas
    Abstract: This paper considers lending to finance projects in a setting where repayment enforcement appears impossible. The loan was illegal and thus legally unenforceable. Creditors were incapable of applying private coercion to force repayment. Borrowers lacked both collateral and reputation capital. Project cash flows were unobservable. The projects were the acquisition of Imperial administrative posts by scholars in nineteenth century Qing China. The lending mechanism was the “trusted-assistant loan.” Our model of trusted-assistant lending shows that it is a renegotiation-proof implementation of efficient state dependent financing. Empirical analysis of officials’ diaries and bank records shows that the employment of trusted-assistant lending and the performance of trusted-assistant loans conforms roughly with the model’s predictions.
    JEL: N25 G21 D86
    Date: 2017–08–29

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