CHINESE ECONOMICS ASSOCIATION (UK) - Cea



CHINESE ECONOMICS ASSOCIATION (UK)

The 19th CEA (UK) Annual Conference

China’s Three Decades of Economic Reform (1978-2008)

1 - 2 April 2008, University of Cambridge, UK

Possible session:

Economic Growth, Income Distribution and Poverty

Chinese provincial economic growth between 1986-2006

proposal by

Mario Biggeri and Danilo Gambelli

Abstract

The People’s Republic of China (PRC), during its transition from a planned economy to a “market socialist economy”, implemented relevant structural and institutional changes. The aims of the reforms were to introduce “pragmatic” changes into all economic sectors in order to modernise and gradually decentralise the Chinese economy to allow local initiative.

The reforms are normally divided into six phases[1]. The last two periods are very challenging and redefining Chinese role in the world economy. In the fifth phase between 1997 and 2001 the privatisation effort and the restructuring of the SOEs and furthermore the changes in foreign trade relationships were connected to Chinese WTO re-admittance commitments. In the sixth phase (from 2002), the ‘going out’ strategy becomes central. Indeed, these two phases have been accompanied by a relevant changes of the role of PRC in the international panorama. Nowadays, the global business revolution, accompanied by the ongoing liberalisation process, has challenged the balance of power in the global market and increased competition among international actors (Nolan and Zang, 2002) and in particular among multinational companies hunt for to maintain and conquer profitable positions in the global value-chains (Gereffi and Kaplinski, 2001).

The aim of this paper is to analyse factors that in different periods affected Chinese provincial economic growth after the reforms of the early 1980’s through a panel analysis covering the period 1986-2006. The production function approach focuses on human capital, “space-serving” infrastructure, sectoral allocation of labour and on institutional changes. A dynamic panel data model based on Arellano and Bond (1998) and Arellano and Bover (1995) approach is used in order to estimate the production function and to analyse possible inter-temporal effects of the GDP in the economic growth and to take into consideration possible problems due to autocorrelation effects of the error term. Potential effects of structural changes due to reform impacts are taken into account.

There are several interesting studies on China’s regional disparities that analyse inequalities among the Chinese provinces. However, only some studies focus on the determinants of provincial economic growth on a such long period 1986-2006 considering the aggregate provincial output level and on why the transfer of development to the inland-border regions, after the reforms of the early 1980’s, has not been automatic. Therefore, in order to find possible solutions for dual economic development and to avoid a definitive “Chinese under-developed inland region” there is a need for a better understanding of factors responsible for provincial differences in economic growth.

Key words: China, economic growth, dynamic panel analysis

Contact author:

Prof. Mario Biggeri (CEA UK member till 2005)

Università di Firenze, Facoltà di Economia

Dipartimento di Scienze Economiche

Via delle Pandette 9, stanza 2.18, tel. 055-4374561, fax 055-4374905

email: mario.biggeri@unifi.it

Dr. Danilo Gambelli (Ph.D, Senior Researcher)

Università Politecnica delle Marche

DIIGA

Via Brecce Bianche

I-60131 ANCONA (Italy)

Tel +39 071 2204629 Fax +39 071 2204474

Email: danilo@agrecon.univpm.it

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[1] In The First phase (1979-1984) was concentrated on agricultural and rural reforms. The second phase (1985-1988) saw the gradual reduction of the State monopoly, the decentralisation process and the development of market-oriented rules, with a slow and difficult liberalisation of prices, while the intent of the third phase (1989 to 1991) was to solve critical macroeconomic issues. The fourth phase was characterised by the constitution of an appropriate system of regulations to meet the development of growing marketisation and the gradual trade liberalisation.

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