Monday, 23 June 2008

Just How Capitalist is China?

An interesting question and an interesting academic paper that attempts to answer it. The work is taken from the book "Capitalism with Chinese Characteristics" so will be fairly accessible to non academic readers.

I am in general agreement with the findings below:

Just How Capitalist is China? [MIT Sloane Research Paper]

This paper is the first chapter of a forthcoming book, Capitalism with Chinese Characteristics (New York: Cambridge University Press, July 2008). The book is a narrative account of the evolution of capitalism in China in the last three decades. (The year 2008 marks the 30th anniversary of economic reforms in China.) The research is based on detailed archival examinations of policy, bureaucratic and bank documents as well as several waves of household and private-sector firm surveys. As an example, I have examined a 22-volume collection of memoranda, directives, operating manuals, rules of personnel evaluations issued by the presidents of China's central bank, all the major commercial banks, rural credit cooperatives, etc. A detailed synopsis of the book appears after this page.

This paper presents the framework for and the summary findings of the entire book. The highlights are:

- Many economists used output share of private sector as evidence that China's business environment became more liberal over time. Measured by output share, China's private sector has grown enormously since 1978. But output share is not an accurate measure of private sector policy because it is correlated with efficiency differentials between private-sector firms and state-owned enterprises (SOEs). During the 1989-1991 period when China cracked down on private sector, the output share of private firms still increased. Another example is from the former Soviet Union. Private agricultural output was quite high because private farming was so much more efficient than state farming. This is not evidence that the former Soviet Union was pro-private sector.

- A superior measure of policy evolution is capital allocation. By this measure the most liberal policy period, by far, was in the 1980s and in the 1990s the investment share by purely privatesector businesses fell substantially. (The share only began to rise after 2002.)

- The changing investment share by the private sector suggests a development few Western academics have noticed - a substantial policy reversal in the 1990s. Survey and documentary evidence suggests that private access to finance was easier in the 1980s than in the 1990s and this was especially true in rural China.

- Evolution of capitalism in China is a function of a political balance between two Chinas - the entrepreneurial, market-driven rural China vis-à-vis the state-led urban China. In the 1980s, rural China gained the upper hand but in the 1990s, urban China gained the upper hand. Although China made notable progress in the 1990s in terms of FDI liberalization and reforms of SOEs, this book assigns greater weight to the rural developments in determining the overall character and the pace of China's transition to capitalism.

- Many economists rely on GDP data to formulate their view of Chinese economy. The tale of the two decades is not reflected in the GDP data but is reflected in the household income data (obtained through surveys). Rural household income grew substantially faster in the liberal 1980s than in the illiberal 1990s. Also social performance deteriorated in the 1990s as well.



Rogue Economist said...

We can probably understand China's long-term strategy this way. Business is war. Elephant forces were used by some ancient warring kingdoms to overwhelm enemy combatants who were on foot. China (the government/state) is a powerful elephant advance force. The foreign businesses competing in the global economy are footsoldiers by comprison. When the advance elephant force has created a large vacuum in the defence of the enemy footsoldiers, the smaller Chinese businesses (their footsoldiers) can now attack and defeat the disintegrated enemy.

Anonymous said...

nike air jordan ajf 20 cheap on sale 230

nike air jordan ajf 20 cheap on sale 231

nike air jordan ajf 20 cheap on sale 233

nike air jordan ajf 20 low cheap on sale 228

nike air jordan ajf 6 cheap on sale 222

nike air jordan ajf 6 cheap on sale 223

nike air jordan ajf 6 5 8 th cheap on sale 221

nike air jordan ajf 6 ls cheap on sale 220

nike air jordan ajf 9 gs cheap on sale 224

nike air jordan ajf 9 low ls cheap on sale 226

nike air jordan dub zero cheap on sale 350

nike air jordan dub zero cheap on sale 351

nike air jordan fusion 20 low ls cheap on sale 232

nike air jordan fusion 3 ls cheap on sale 208

nike air jordan fusion 4 cheap on sale 211

nike air jordan fusion 4 cheap on sale 212

nike air jordan fusion 4 cheap on sale 213

nike air jordan fusion 9 cheap on sale 227

Anonymous said...

nike air jordan girls ajf 6 gs cheap on sale 219

nike air jordon fusion 3 cheap on sale 209

nike jordan flight 45 men s sneakers cheap on sale 346

sweet air jordan flight 45 in white powder blue cheap on sale 344
nike air jordan force 12 ajf12 white bright cactus 1411

nike shox r4 white silver black 1149

jordan ajf8 white black varsity red 1337

nike air jordan 2009 black varsity red white 1375

nike dunk high varsity red white team red 1203

nike dunk high premium black black anthracite 1238

nike dunk high premium sail total orange black 1196

nike dunk high supreme black sunbeam vibrant yellow 1165

nike dunk low black white 1250

nike dunk low orange blaze varsity bue white 1243

nike dunk low varsity red black white 1249

nike dunk low 60 abyss brickhouse 1303

nike dunk low cl anthracite anthracite black voltage yellow 1253

nike jordan spizike white varsity red true blue 1329

Anonymous said...

nike shox nz plus white real pink black 1119

nike shox nz sl black black metallic silver 1124

nike shox r4 black 1155

air force 1 07 low 2008 valentines day edition carmine white logan berry laser pink 483

air force 1 07 low supreme inside out croc edition black dark loden 480

air force 1 high white white 789

air force 1 high supreme futura white metallic silver white 758

air force 1 low black black neutral grey 445

air force 1 low black white white 677

air force 1 low black white 399

air force 1 low dark cinder sail 390

air force 1 low medium grey medium grey white 365

air force 1 low puerto rico 4 407

air force 1 low white boulder gum light brown 453

air force 1 low white pink white 642

air force 1 low white white perf obsidian 448

air force 1 low 07 black white old royal blue 443

air force 1 low insideout edition bison pro gold vintage purple 601