The Chinese Economy

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  • Format: Paperback
  • Copyright: 2006-12-22
  • Publisher: Mit Pr

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This comprehensive overview of the modern Chinese economy by a noted expert on China's economic development offers a quality and breadth of coverage not found in any other English-language text. In The Chinese Economy, Barry Naughton provides both an engaging, broadly focused introduction to China's economy since 1949 and original insights based on his own extensive research. The book will be an essential resource for students, teachers, scholars, business people, and policymakers. It is suitable for classroom use for undergraduate or graduate courses. After presenting background material on the pre-1949 economy and the industrialization, reform, and market transition that have taken place since, the book examines different aspects of the modern Chinese economy. It analyzes patterns of growth and development, including population growth and the one-child family policy; the rural economy, including agriculture and rural industrialization; industrial and technological development in urban areas; international trade and foreign investment; macroeconomic trends and cycles and the financial system; and the largely unaddressed problems of environmental quality and the sustainability of growth. The text is notable also for placing China's economy in interesting comparative contexts, discussing it in relation to other transitional or developing economies and to such advanced industrial countries as the U.S. and Japan. It provides both a broad historical and macro perspective as well as a focused examination of the actual workings of China's complex and dynamic economic development. Interest in the Chinese economy will only grow as China becomes an increasingly important player on the world's stage. This book will be the standard reference for understanding and teaching about the next economic superpower.

Author Biography

Barry Naughton is Professor of Chinese Economy and Sokwanlok Chair of Chinese International Affairs at the University of California, San Diego

Table of Contents

Acknowledgmentsp. xv
Introductionp. 1
From Transition to Developmentp. 3
The Distance Traveledp. 4
The Dual Transitionp. 5
China's Growth Performancep. 6
Becoming a "Normal" Countryp. 8
China to the Futurep. 10
Using This Textbookp. 12
Bibliographyp. 13
Legacies and Settingp. 15
The Geographical Settingp. 17
Landformsp. 18
Climate and Waterp. 20
Provinces and Regionsp. 22
Mineral Resourcesp. 28
Conclusion: Regional Differentiationp. 29
Bibliographyp. 31
The Chinese Economy Before 1949p. 33
The Traditional Chinese Economy, 1127-1911p. 34
High-Productivity Traditional Agriculturep. 34
The Commercialized Countrysidep. 36
Sophisticated Institutionsp. 36
Competitive Marketsp. 37
Small-Scale, "Bottom-Heavy" Economyp. 37
Crisis of the Traditional Economy?p. 38
The Failed Response to the West and Japanp. 40
The Beginnings of Industrialization, 1912-1937p. 43
Industryp. 43
Evaluation: How Broad Was Development in the 1912-1937 Period?p. 45
War and Civil War, 1937-1949p. 47
The Rise and Fall of a Japan-Centered East Asian Economyp. 47
The Rise of Manchuriap. 48
Increased State Interventionp. 49
Inflationp. 49
Legacies of the Pre-1949 Economyp. 50
Legacy for the Socialist Era (1949-1978)p. 50
Legacy for the Post-1978 Market Economyp. 51
Bibliographyp. 53
The Socialist Era, 1949-1978: Big Push Industrialization and Policy Instabilityp. 55
The Big Push Development Strategyp. 56
The Command Economic System in Chinap. 59
Policy Instabilityp. 62
Economic Recovery, 1949-1952p. 64
1953 and 1956: The Twin Peaks of the First Five-Year Planp. 65
Retrenchment: The "Hundred Flowers" of 1956-1957p. 67
The Great Leap Forward, 1958-1960p. 69
Retrenchment: Crisis and "Readjustment," 1961-1963p. 72
Launch of the Third Front, 1964-1966: New Expansion Hijacked by Radicalismp. 73
Retrenchment: The Cultural Revolution, 1967-1969p. 74
The Maoist Model: A New Leap in 1970p. 75
Retrenchment: Consolidation and Drift, 1972-1976p. 76
The Leap Outward: 1978 and the End of Maoismp. 77
A Final Turning Point: The Third Plenum and the Beginning of Economic Reformp. 79
Legacies of the Socialist Periodp. 79
The Legacy of Policy Instabilityp. 79
The Shortcomings of the Development Strategyp. 80
Human Capital Basep. 82
Bibliographyp. 83
Market Transition: Strategy and Processp. 85
The Chinese Approach to Transitionp. 86
How Did Reforms Start? The Initial Breakthrough in the Countrysidep. 88
A Two-Phase Framework of Economic Reformp. 90
Elements of China's Transition Through 1992p. 91
Dual-Track Systemp. 91
Growing Out of the Planp. 92
Particularistic Contractsp. 94
Entryp. 94
Prices Equating Supply and Demandp. 94
Incremental Managerial Reforms Instead of Privatizationp. 95
Disarticulationp. 95
Initial Macroeconomic Stabilization Achieved Through the Planp. 96
Continued High Saving and Investmentp. 96
Conclusion of First-Phase Reformsp. 97
The Tiananmen Interludep. 98
The Second Phase of Reform, 1993-Presentp. 100
Prerequisitesp. 101
Market Reunificationp. 101
Recentralizationp. 101
Macroeconomic Austerityp. 102
Regulatory Approach and Administrative Restructuringp. 102
Fiscal and Tax Systemp. 103
Banking and Financial Systemp. 103
Corporate Governancep. 104
External Sector: Membership in the World Trade Organizationp. 104
Outcomesp. 105
From Inflation to Price Stabilityp. 105
State Enterprise Restructuring and Downsizingp. 105
Privatizationp. 106
Reform with Losersp. 106
Contemporary Challengesp. 107
Bibliographyp. 110
The Urban-Rural Dividep. 113
A Dualistic System: The Division Between Urban and Ruralp. 114
Origins of the Urban-Rural Dividep. 114
The Urban Economic Systemp. 116
The Danweip. 116
Urban Property Rightsp. 118
The Rural Economic Systemp. 119
Rural Collectivesp. 119
Rural Property Rightsp. 119
"Fuzzy" Property Rights and Land-Use Disputesp. 121
The Evolution of the Rural and Urban Systems During Market Transitionp. 122
Invisible Walls: Administrative Barriers Todayp. 124
Urbanizationp. 126
Rural-Urban Migrationp. 129
Overview of Migrationp. 129
Characteristics of Migrantsp. 131
Economic Consequences of the Urban-Rural Dividep. 131
Living Standards and Restrictions on Mobilityp. 132
Addressing the Urban-Rural Dividep. 134
Conclusionp. 134
Bibliographyp. 135
Patterns of Growth and Developmentp. 137
Growth and Structural Changep. 139
Growthp. 140
Data and the Measurement of Growthp. 140
Growth in Comparative Perspectivep. 142
Instability in Growthp. 143
Investmentp. 143
Structural Change: Common Patternsp. 148
Structural Change in China: Laborp. 151
Structural Change in China: GDPp. 153
Structural Change and Globalizationp. 156
Conclusionp. 157
Bibliographyp. 158
Population Growth and the One-Child Familyp. 161
The Demographic Transitionp. 161
China's Demographic Transitionp. 164
The Role of Government Policyp. 167
Consequences of the One-Child Policyp. 170
Changing Age Structure of the Populationp. 172
Conclusionp. 177
Bibliographyp. 177
Labor and Human Capitalp. 179
The Institutional Transformation of Chinese Laborp. 180
The Labor Forcep. 180
Employment: Ownership and Labor Mobilityp. 181
Employment, Unemployment, and State-Sector Downsizingp. 185
The Informal Sector: Emerging Dualism Within Urban Labor Marketsp. 189
Rural Labor Marketsp. 191
How Well Do Labor Markets Function in China Today?p. 192
Returns to Educationp. 192
Human Capital and Educational Attainmentp. 195
Other Attributesp. 198
The Migration Decisionp. 199
Labor Markets Concludedp. 201
Social Securityp. 202
Conclusionp. 206
Bibliographyp. 206
Living Standards: Incomes, Inequality, and Povertyp. 209
Income Growthp. 210
Povertyp. 212
Rural Povertyp. 212
Official Poverty Linep. 212
World Bank Internationally Comparable Poverty Linep. 212
Explaining Poverty Trendsp. 214
Urban Povertyp. 216
Overall Povertyp. 216
Inequalityp. 217
Accounting for All Income Sourcesp. 220
Physical Quality of Life Indicatorsp. 221
Life Expectancy at Birthp. 222
Other Health-Related Indicatorsp. 222
Educationp. 223
Human Development Indexp. 223
Income, GDP per Capita, and Purchasing Power Parity Once Againp. 225
Conclusionp. 226
Bibliographyp. 227
The Rural Economyp. 229
Rural Organizationp. 231
The Chinese Villagep. 231
Agricultural Collectivesp. 233
Features of the Agricultural Collectivesp. 234
Discussion of Collectivesp. 236
The Agricultural Policy Environment of the Collectives: "Grain First"p. 239
The Second Revolution in the Countryside: Rural Reforms, 1979-1984p. 240
Production Surges in the Wake of Rural Organizational Changep. 242
The Side-Effect of Reform: Rural Public Services Declinep. 243
The Emergence of Rural Land Marketsp. 246
Bibliographyp. 248
Agriculture: Output, Inputs, and Technologyp. 251
Overview of Post-1949 Agriculturep. 252
Technology Choice and Technical Innovation in Agriculturep. 254
The Green Revolutionp. 258
Irrigationp. 258
Agricultural Chemicalsp. 260
Seedsp. 261
Motive Power in the Countrysidep. 263
Output and Yields: The Challenge of Intensificationp. 265
Diversification and the Challenge of the Futurep. 266
Genetically Modified Organismsp. 267
Globalizationp. 268
Bibliographyp. 269
Rural Industrialization: Township and Village Enterprisesp. 271
Origins of the TVEsp. 272
The Golden Age of TVE Developmentp. 274
Causes of Rapid Growthp. 275
Diverse Regional Models of TVE Developmentp. 282
The Southern Jiangsu (Sunan) Modelp. 282
The Wenzhou Modelp. 283
The Pearl River Delta Modelp. 284
Failed or Absent TVE Developmentp. 284
The Transformation of TVEs in the New Centuryp. 285
The Changing Economic Environment of TVEsp. 285
TVE Restructuring: The Great Privatizationp. 286
National Policy and Local Modelsp. 288
Market Conditions and Privatizationp. 288
Insider Privatizationp. 289
Local Variation in the Privatization Processp. 291
Emergence of New Forms of Rural Industry in the Twenty-First Centuryp. 292
Bibliographyp. 293
The Urban Economyp. 295
Industry: Ownership and Governancep. 297
Ownership Change: A Diverse Industrial Basep. 298
Ownership Change in the First Period of Transitionp. 299
Ownership Change from 1996 Through the Presentp. 301
Industrial Financep. 304
Transforming Corporate Governance in the State Sectorp. 308
Creating Corporate Governance: Transition Ap. 310
Creating Corporations: Transition Bp. 313
Corporatization and the Company Law: Objectives and Principlesp. 314
The Chinese System in Practicep. 316
Typology of Corporate Governance Systemsp. 319
Privatization and Hybrid Ownershipp. 323
Conclusionp. 325
Bibliographyp. 326
Structural Change: Industry, Energy, and Infrastructurep. 329
Growth and Structural Change in Manufacturingp. 329
Regional Growth Patternsp. 333
Energyp. 333
Energy Efficiency of the Economyp. 336
The Three Main Energy Sectorsp. 338
Coalp. 338
Oil and Gasp. 339
Electric Powerp. 341
Energy Security, Diversification, and Importsp. 341
Telecommunicationsp. 343
Common Features: Infrastructure Investmentp. 345
Conclusionp. 347
Bibliographyp. 347
Technology Policy and the Knowledge-based Economyp. 349
Pursuing Critical Technologies: The R&D Effortp. 351
The Trajectory of China's Technology Effortp. 353
Strategies of R&D Investmentp. 356
Do It Yourselfp. 356
Buy Itp. 357
Bargain for Itp. 357
Seed Itp. 358
Encourage Spin-offsp. 359
Open Up to Foreign Direct Investmentp. 360
Support Domestic Entrepreneurshipp. 360
Human Capital Resource Basep. 361
The Output of the R&D Effortp. 363
Redefining Government Technology Policy in the Twenty-First Centuryp. 365
Aligning Incentives in Favor of High-Technology Developmentp. 366
Deeper Integration into Global Production Networksp. 368
Conclusionp. 371
Bibliographyp. 372
China and the World Economyp. 375
International Tradep. 377
Backgroundp. 379
Initial Reform Stepsp. 381
Liberalizing the Foreign-Trade Systemp. 382
A Dualist Trade Regime: The Export-Processing Systemp. 386
Toward an Open Economyp. 388
Currency Convertibilityp. 388
World Trade Organization Membershipp. 389
Openness Revisitedp. 391
Outcomes: Rapid Growth and Structural Changep. 392
Exportsp. 393
Importsp. 394
High Technology Tradep. 394
Regional Composition of Trade Within Chinap. 396
Conclusionp. 398
Bibliographyp. 399
Foreign Investmentp. 401
FDI in the Chinese Economyp. 402
"Zones": The Gradual Liberalization of the Investment Regimep. 406
The Investment Regime Todayp. 410
Sources of Investment in Chinap. 413
The China Circlep. 416
FDI in Contextp. 419
Sectoral Composition of FDI: The WTO Impactp. 419
Modes of Capital Inflowp. 420
Conclusionp. 422
Bibliographyp. 423
Macroeconomics and Financep. 425
Macroeconomic Trends and Cyclesp. 427
Trends in National Savingp. 428
The Fiscal System and Fiscal Reformp. 430
Reversing Fiscal Erosionp. 433
Broadening the Tax Base: Horizontal Equityp. 433
Restructuring Central-Local Relationsp. 434
The Fiscal System Todayp. 436
Intergovernmental Fiscal Relations: Principlesp. 436
Inadequacy of Local Government Revenue in Rural Areasp. 437
Extrabudgetary Funds, Levies, and Chargesp. 438
Abolishing Local Taxes and Stepping Up Transfersp. 439
Arbitrary Nature of Transfersp. 440
Fiscal Deficits and Fiscal Policyp. 441
Inflation and Macroeconomic Cyclesp. 442
Monetary Policyp. 444
Conclusionp. 445
Bibliographyp. 446
Financial Systemp. 449
The Financial System in the Planned Economy and under Reformp. 451
The Banking Systemp. 454
State-Owned Commercial Banksp. 454
Joint-Stock Commercial Banksp. 456
City Banksp. 457
Other Banksp. 457
Policy Banksp. 457
Rural Credit Cooperativesp. 458
The Fringep. 458
Central Bank and Regulatory Apparatusp. 460
Weakness of the Banking Systemp. 460
Measures to Reduce the Stock of Nonperforming Loansp. 462
The "Flow" Problem: Ensuring Good Lending Decisionsp. 464
Current Bank-Reform Program and Prospects for the Futurep. 466
Stock Markets: Learning to Crawl?p. 467
Birth of the Market: Raising Funds for the State Sectorp. 468
Characteristics of the Marketp. 469
Circulating and Noncirculating Sharesp. 469
Low Contestabilityp. 471
Rationing of Listing Opportunitiesp. 471
Thin Marketsp. 471
Weak Disclosure and Regulation; Multiple Related-Party Transactionsp. 472
Policy-Driven Marketp. 473
Insider Control and Manipulationp. 473
Reform Initiatives: Selling Down the State Share: Changing the "Split Share Structure"p. 474
Institutional Investorsp. 475
Comparative Evaluation of China's Stock Marketp. 476
Bond Marketsp. 477
Other Financial Marketsp. 478
Conclusionp. 478
Bibliographyp. 481
Conclusion: China's Futurep. 485
Environmental Quality and the Sustainability of Growthp. 487
Pollutionp. 489
Air Pollutionp. 490
Water Pollutionp. 491
Costs of Pollutionp. 493
Pollution Controlp. 494
Sustainabilityp. 495
Broad Impact of Pollution and Global Warmingp. 495
Sustainability of Land and Water Resourcesp. 497
Desertificationp. 498
Forests and Grasslandsp. 499
Water Availabilityp. 500
Conclusionp. 502
Bibliographyp. 503
Indexp. 505
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