The Chinese Economy

by Naughton, Barry

• ISBN13: 9780262640640
• ISBN10: 0262640643
• Format: Paperback
• Copyright: 2006-12-22
• Publisher: Mit Pr

Summary

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

Acknowledgments	p. xv
Introduction	p. 1
From Transition to Development	p. 3
The Distance Traveled	p. 4
The Dual Transition	p. 5
China's Growth Performance	p. 6
Becoming a "Normal" Country	p. 8
China to the Future	p. 10
Using This Textbook	p. 12
Bibliography	p. 13
Legacies and Setting	p. 15
The Geographical Setting	p. 17
Landforms	p. 18
Climate and Water	p. 20
Provinces and Regions	p. 22
Mineral Resources	p. 28
Conclusion: Regional Differentiation	p. 29
Bibliography	p. 31
The Chinese Economy Before 1949	p. 33
The Traditional Chinese Economy, 1127-1911	p. 34
High-Productivity Traditional Agriculture	p. 34
The Commercialized Countryside	p. 36
Sophisticated Institutions	p. 36
Competitive Markets	p. 37
Small-Scale, "Bottom-Heavy" Economy	p. 37
Crisis of the Traditional Economy?	p. 38
The Failed Response to the West and Japan	p. 40
The Beginnings of Industrialization, 1912-1937	p. 43
Industry	p. 43
Evaluation: How Broad Was Development in the 1912-1937 Period?	p. 45
War and Civil War, 1937-1949	p. 47
The Rise and Fall of a Japan-Centered East Asian Economy	p. 47
The Rise of Manchuria	p. 48
Increased State Intervention	p. 49
Inflation	p. 49
Legacies of the Pre-1949 Economy	p. 50
Legacy for the Socialist Era (1949-1978)	p. 50
Legacy for the Post-1978 Market Economy	p. 51
Bibliography	p. 53
The Socialist Era, 1949-1978: Big Push Industrialization and Policy Instability	p. 55
The Big Push Development Strategy	p. 56
The Command Economic System in China	p. 59
Policy Instability	p. 62
Economic Recovery, 1949-1952	p. 64
1953 and 1956: The Twin Peaks of the First Five-Year Plan	p. 65
Retrenchment: The "Hundred Flowers" of 1956-1957	p. 67
The Great Leap Forward, 1958-1960	p. 69
Retrenchment: Crisis and "Readjustment," 1961-1963	p. 72
Launch of the Third Front, 1964-1966: New Expansion Hijacked by Radicalism	p. 73
Retrenchment: The Cultural Revolution, 1967-1969	p. 74
The Maoist Model: A New Leap in 1970	p. 75
Retrenchment: Consolidation and Drift, 1972-1976	p. 76
The Leap Outward: 1978 and the End of Maoism	p. 77
A Final Turning Point: The Third Plenum and the Beginning of Economic Reform	p. 79
Legacies of the Socialist Period	p. 79
The Legacy of Policy Instability	p. 79
The Shortcomings of the Development Strategy	p. 80
Human Capital Base	p. 82
Bibliography	p. 83
Market Transition: Strategy and Process	p. 85
The Chinese Approach to Transition	p. 86
How Did Reforms Start? The Initial Breakthrough in the Countryside	p. 88
A Two-Phase Framework of Economic Reform	p. 90
Elements of China's Transition Through 1992	p. 91
Dual-Track System	p. 91
Growing Out of the Plan	p. 92
Particularistic Contracts	p. 94
Entry	p. 94
Prices Equating Supply and Demand	p. 94
Incremental Managerial Reforms Instead of Privatization	p. 95
Disarticulation	p. 95
Initial Macroeconomic Stabilization Achieved Through the Plan	p. 96
Continued High Saving and Investment	p. 96
Conclusion of First-Phase Reforms	p. 97
The Tiananmen Interlude	p. 98
The Second Phase of Reform, 1993-Present	p. 100
Prerequisites	p. 101
Market Reunification	p. 101
Recentralization	p. 101
Macroeconomic Austerity	p. 102
Regulatory Approach and Administrative Restructuring	p. 102
Fiscal and Tax System	p. 103
Banking and Financial System	p. 103
Corporate Governance	p. 104
External Sector: Membership in the World Trade Organization	p. 104
Outcomes	p. 105
From Inflation to Price Stability	p. 105
State Enterprise Restructuring and Downsizing	p. 105
Privatization	p. 106
Reform with Losers	p. 106
Contemporary Challenges	p. 107
Bibliography	p. 110
The Urban-Rural Divide	p. 113
A Dualistic System: The Division Between Urban and Rural	p. 114
Origins of the Urban-Rural Divide	p. 114
The Urban Economic System	p. 116
The Danwei	p. 116
Urban Property Rights	p. 118
The Rural Economic System	p. 119
Rural Collectives	p. 119
Rural Property Rights	p. 119
"Fuzzy" Property Rights and Land-Use Disputes	p. 121
The Evolution of the Rural and Urban Systems During Market Transition	p. 122
Invisible Walls: Administrative Barriers Today	p. 124
Urbanization	p. 126
Rural-Urban Migration	p. 129
Overview of Migration	p. 129
Characteristics of Migrants	p. 131
Economic Consequences of the Urban-Rural Divide	p. 131
Living Standards and Restrictions on Mobility	p. 132
Addressing the Urban-Rural Divide	p. 134
Conclusion	p. 134
Bibliography	p. 135
Patterns of Growth and Development	p. 137
Growth and Structural Change	p. 139
Growth	p. 140
Data and the Measurement of Growth	p. 140
Growth in Comparative Perspective	p. 142
Instability in Growth	p. 143
Investment	p. 143
Structural Change: Common Patterns	p. 148
Structural Change in China: Labor	p. 151
Structural Change in China: GDP	p. 153
Structural Change and Globalization	p. 156
Conclusion	p. 157
Bibliography	p. 158
Population Growth and the One-Child Family	p. 161
The Demographic Transition	p. 161
China's Demographic Transition	p. 164
The Role of Government Policy	p. 167
Consequences of the One-Child Policy	p. 170
Changing Age Structure of the Population	p. 172
Conclusion	p. 177
Bibliography	p. 177
Labor and Human Capital	p. 179
The Institutional Transformation of Chinese Labor	p. 180
The Labor Force	p. 180
Employment: Ownership and Labor Mobility	p. 181
Employment, Unemployment, and State-Sector Downsizing	p. 185
The Informal Sector: Emerging Dualism Within Urban Labor Markets	p. 189
Rural Labor Markets	p. 191
How Well Do Labor Markets Function in China Today?	p. 192
Returns to Education	p. 192
Human Capital and Educational Attainment	p. 195
Other Attributes	p. 198
The Migration Decision	p. 199
Labor Markets Concluded	p. 201
Social Security	p. 202
Conclusion	p. 206
Bibliography	p. 206
Living Standards: Incomes, Inequality, and Poverty	p. 209
Income Growth	p. 210
Poverty	p. 212
Rural Poverty	p. 212
Official Poverty Line	p. 212
World Bank Internationally Comparable Poverty Line	p. 212
Explaining Poverty Trends	p. 214
Urban Poverty	p. 216
Overall Poverty	p. 216
Inequality	p. 217
Accounting for All Income Sources	p. 220
Physical Quality of Life Indicators	p. 221
Life Expectancy at Birth	p. 222
Other Health-Related Indicators	p. 222
Education	p. 223
Human Development Index	p. 223
Income, GDP per Capita, and Purchasing Power Parity Once Again	p. 225
Conclusion	p. 226
Bibliography	p. 227
The Rural Economy	p. 229
Rural Organization	p. 231
The Chinese Village	p. 231
Agricultural Collectives	p. 233
Features of the Agricultural Collectives	p. 234
Discussion of Collectives	p. 236
The Agricultural Policy Environment of the Collectives: "Grain First"	p. 239
The Second Revolution in the Countryside: Rural Reforms, 1979-1984	p. 240
Production Surges in the Wake of Rural Organizational Change	p. 242
The Side-Effect of Reform: Rural Public Services Decline	p. 243
The Emergence of Rural Land Markets	p. 246
Bibliography	p. 248
Agriculture: Output, Inputs, and Technology	p. 251
Overview of Post-1949 Agriculture	p. 252
Technology Choice and Technical Innovation in Agriculture	p. 254
The Green Revolution	p. 258
Irrigation	p. 258
Agricultural Chemicals	p. 260
Seeds	p. 261
Motive Power in the Countryside	p. 263
Output and Yields: The Challenge of Intensification	p. 265
Diversification and the Challenge of the Future	p. 266
Genetically Modified Organisms	p. 267
Globalization	p. 268
Bibliography	p. 269
Rural Industrialization: Township and Village Enterprises	p. 271
Origins of the TVEs	p. 272
The Golden Age of TVE Development	p. 274
Causes of Rapid Growth	p. 275
Diverse Regional Models of TVE Development	p. 282
The Southern Jiangsu (Sunan) Model	p. 282
The Wenzhou Model	p. 283
The Pearl River Delta Model	p. 284
Failed or Absent TVE Development	p. 284
The Transformation of TVEs in the New Century	p. 285
The Changing Economic Environment of TVEs	p. 285
TVE Restructuring: The Great Privatization	p. 286
National Policy and Local Models	p. 288
Market Conditions and Privatization	p. 288
Insider Privatization	p. 289
Local Variation in the Privatization Process	p. 291
Emergence of New Forms of Rural Industry in the Twenty-First Century	p. 292
Bibliography	p. 293
The Urban Economy	p. 295
Industry: Ownership and Governance	p. 297
Ownership Change: A Diverse Industrial Base	p. 298
Ownership Change in the First Period of Transition	p. 299
Ownership Change from 1996 Through the Present	p. 301
Industrial Finance	p. 304
Transforming Corporate Governance in the State Sector	p. 308
Creating Corporate Governance: Transition A	p. 310
Creating Corporations: Transition B	p. 313
Corporatization and the Company Law: Objectives and Principles	p. 314
The Chinese System in Practice	p. 316
Typology of Corporate Governance Systems	p. 319
Privatization and Hybrid Ownership	p. 323
Conclusion	p. 325
Bibliography	p. 326
Structural Change: Industry, Energy, and Infrastructure	p. 329
Growth and Structural Change in Manufacturing	p. 329
Regional Growth Patterns	p. 333
Energy	p. 333
Energy Efficiency of the Economy	p. 336
The Three Main Energy Sectors	p. 338
Coal	p. 338
Oil and Gas	p. 339
Electric Power	p. 341
Energy Security, Diversification, and Imports	p. 341
Telecommunications	p. 343
Common Features: Infrastructure Investment	p. 345
Conclusion	p. 347
Bibliography	p. 347
Technology Policy and the Knowledge-based Economy	p. 349
Pursuing Critical Technologies: The R&D Effort	p. 351
The Trajectory of China's Technology Effort	p. 353
Strategies of R&D Investment	p. 356
Do It Yourself	p. 356
Buy It	p. 357
Bargain for It	p. 357
Seed It	p. 358
Encourage Spin-offs	p. 359
Open Up to Foreign Direct Investment	p. 360
Support Domestic Entrepreneurship	p. 360
Human Capital Resource Base	p. 361
The Output of the R&D Effort	p. 363
Redefining Government Technology Policy in the Twenty-First Century	p. 365
Aligning Incentives in Favor of High-Technology Development	p. 366
Deeper Integration into Global Production Networks	p. 368
Conclusion	p. 371
Bibliography	p. 372
China and the World Economy	p. 375
International Trade	p. 377
Background	p. 379
Initial Reform Steps	p. 381
Liberalizing the Foreign-Trade System	p. 382
A Dualist Trade Regime: The Export-Processing System	p. 386
Toward an Open Economy	p. 388
Currency Convertibility	p. 388
World Trade Organization Membership	p. 389
Openness Revisited	p. 391
Outcomes: Rapid Growth and Structural Change	p. 392
Exports	p. 393
Imports	p. 394
High Technology Trade	p. 394
Regional Composition of Trade Within China	p. 396
Conclusion	p. 398
Bibliography	p. 399
Foreign Investment	p. 401
FDI in the Chinese Economy	p. 402
"Zones": The Gradual Liberalization of the Investment Regime	p. 406
The Investment Regime Today	p. 410
Sources of Investment in China	p. 413
The China Circle	p. 416
FDI in Context	p. 419
Sectoral Composition of FDI: The WTO Impact	p. 419
Modes of Capital Inflow	p. 420
Conclusion	p. 422
Bibliography	p. 423
Macroeconomics and Finance	p. 425
Macroeconomic Trends and Cycles	p. 427
Trends in National Saving	p. 428
The Fiscal System and Fiscal Reform	p. 430
Reversing Fiscal Erosion	p. 433
Broadening the Tax Base: Horizontal Equity	p. 433
Restructuring Central-Local Relations	p. 434
The Fiscal System Today	p. 436
Intergovernmental Fiscal Relations: Principles	p. 436
Inadequacy of Local Government Revenue in Rural Areas	p. 437
Extrabudgetary Funds, Levies, and Charges	p. 438
Abolishing Local Taxes and Stepping Up Transfers	p. 439
Arbitrary Nature of Transfers	p. 440
Fiscal Deficits and Fiscal Policy	p. 441
Inflation and Macroeconomic Cycles	p. 442
Monetary Policy	p. 444
Conclusion	p. 445
Bibliography	p. 446
Financial System	p. 449
The Financial System in the Planned Economy and under Reform	p. 451
The Banking System	p. 454
State-Owned Commercial Banks	p. 454
Joint-Stock Commercial Banks	p. 456
City Banks	p. 457
Other Banks	p. 457
Policy Banks	p. 457
Rural Credit Cooperatives	p. 458
The Fringe	p. 458
Central Bank and Regulatory Apparatus	p. 460
Weakness of the Banking System	p. 460
Measures to Reduce the Stock of Nonperforming Loans	p. 462
The "Flow" Problem: Ensuring Good Lending Decisions	p. 464
Current Bank-Reform Program and Prospects for the Future	p. 466
Stock Markets: Learning to Crawl?	p. 467
Birth of the Market: Raising Funds for the State Sector	p. 468
Characteristics of the Market	p. 469
Circulating and Noncirculating Shares	p. 469
Low Contestability	p. 471
Rationing of Listing Opportunities	p. 471
Thin Markets	p. 471
Weak Disclosure and Regulation; Multiple Related-Party Transactions	p. 472
Policy-Driven Market	p. 473
Insider Control and Manipulation	p. 473
Reform Initiatives: Selling Down the State Share: Changing the "Split Share Structure"	p. 474
Institutional Investors	p. 475
Comparative Evaluation of China's Stock Market	p. 476
Bond Markets	p. 477
Other Financial Markets	p. 478
Conclusion	p. 478
Bibliography	p. 481
Conclusion: China's Future	p. 485
Environmental Quality and the Sustainability of Growth	p. 487
Pollution	p. 489
Air Pollution	p. 490
Water Pollution	p. 491
Costs of Pollution	p. 493
Pollution Control	p. 494
Sustainability	p. 495
Broad Impact of Pollution and Global Warming	p. 495
Sustainability of Land and Water Resources	p. 497
Desertification	p. 498
Forests and Grasslands	p. 499
Water Availability	p. 500
Conclusion	p. 502
Bibliography	p. 503
Index	p. 505
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