Pre-1998 Working Papers: Summaries
MULTIPLE DEPRIVATION IN RURAL CHINA
Wu Guobao, Sue Richardson, Peter Travers
Income is one measure of material well-being. But do the people with the lowest income also work the longest hours? Are they also malnuourished and unable to read? Do social isolation and ill-health compound the hardships of low income? On the evidence presented in this paper the answer for poor rural Chinese households generally is "no".
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RURAL POVERTY AND ITS CAUSES IN CHINA-96/2
Wu Guobao, Sue Richardson, Peter Travers
The causes of poverty in rural China have been explained in a variety of ways. These explanations include poor natural endowments, a high dependency ratio and inadequate capital and education. These explanations are examined using a unique set of survey data.
RECENT DEVELOPMENTS IN FOREIGN DIRECT INVESTMENT
IN CHINA-96/3
Chen Chunlai
Since 1993 China has become the second largest FDI recipient in the world and the single largest host country among the developing countries. This paper finds that the regional distribution of FDI inflows into China has been very uneven and mainly concentrated in the East region. Among the economic sectors, industry and real estate sectors are the major FDI recipients. FDI inflows into China are mainly concentrated in labour intensive manufacturing industries, which reveals that taking advantage of China’s cheap labour is the main motive for foreign investors in China. FDI inflows into China have been dominated by NIEs, especially by Hong Kong. This paper discusses several factors for the domination of NIEs’ investments in China and reviews the recent policy and regulation changes towards FDI.
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RESEARCH ON RURAL-TO-URBAN LABOUR MIGRATION IN
THE POST-REFORM CHINA: A SURVEY-96/4
Harry X Wu, Li Zhou
This paper surveys most recently published, specially large sample survey-based, studies on China’s rural-to-urban labour migration. Apart from discussing the recent trends in labour migration in China, including the size, the spatial pattern and temporal dimension of migration, and the demographic and economic characteristics of migrant labourers, it focuses on research findings on policy effects on migrant labourers’ behaviours in searching for jobs, choosing occupations, remitting moneys and keeping family ties. This paper also reviews the studies on the consequences such labour migration has brought about to the urban and rural economies, as well as to migrant labourers themselves.
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ECONOMIC GROWTH AND TRADE DEPENDENCY IN CHINA-96/5
Christopher Findlay, Andrew Watson
This paper examines the extent of China's inter-relationship with the world economy and the level of dependency on world trade. It examines four main sectors: grains, fibres, iron and steel, and energy. It argues that China's level of trade interaction is not as high as the surface figures suggest. The main argument is that China's relationship with the world is an interdependent one in which China relies on access to markets for its exports of manufactures and primary product exporters need a stable relationship with China if world markets are to avoid instability and large fluctuations.
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CHINA'S STEEL IMPORTS: AN OUTLINE OF RECENT TRADE
BARRIERS-96/6
Ian Dickson
Since 1993, amounts of iron and steel imported into China have steadily declined. Coincidentally, China’s State Council released an administrative circular aimed at controlling steel imports.This paper describes trade barriers applicable to iron and steel imports. These barriers fall under three categories: (1) Tariffs. (2) Licensing and registration. (3) Trading rights and "canalisation". The paper develops a number of hypotheses for further investigation about the impact of barriers on steel imports.
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CHANGING PATTERNS OF ALCOHOL CONSUMPTION IN RURAL
CHINA: IMPLICATIONS FOR THE GRAIN SECTION-96/7
Yanrui Wu
This paper applies a demand model to examine alcohol consumption in rural China. Its objective is to investigate alcohol consumption patterns and their determinants in rural households. The empirical analysis is based on survey data of 1000 rural households located in twenty counties within five provinces of China. The main issues considered include the effects of household income and demographic characteristics such as age, education, household size, location and occupation, on alcohol consumption.
This study is the first of its kind and has important policy implications. In particular this study can shed light on the future demand for grain in China. Alcohol production is one of the major industrial users of grain. Changes in alcohol consumption patterns can directly affect the demand for grain in the future. It is an issue of great strategic significance for both China and the rest of the world.
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CHALLENGES TO CHINA'S ENERGY SECURITY-96/8
Chao Yang Peng
Energy security is of increasing concern to China. This arises from the rapid growth and non-substitutability of China's energy demand, the perceptible downturn in China's energy production, and competition for energy imports from neighbouring East Asian economies. This paper explores some of the processes and factors that affect energy demand and supply in China and considers their implications for China's trade in energy and for the energy policies of both China and its trade partners. The analysis shows that China will increasingly depend on the rest of the world as both an export market and a source of raw materials such as energy. Further economic reforms and the development of a liberal and transparent policy environment that allows fluid trade and investment in the Asia Pacific region are essential for energy security in China and in the region.
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SOURCES OF PRODUCTIVITY DISPARITIES IN REGIONAL
GRAIN PRODUCTION IN CHINA-96/9
Yang Hong
The study utilises survey data on 1000 households in rural China to investigate sources of disparities in factor productivities for rice, wheat and maize in different provinces. The effects of natural endowments are emphasised. It is found that for respective crops, the level of factor productivities is generally higher in their major producing areas than that in the non-major producing areas due partly to more suitable natural conditions and more specialised production. Meanwhile, farmers' production efforts, in particular land input also tend to be in favour of major crops. This biased behaviour rises factor productivities for major crops and lowers them for non-major crops in different regions. The finding of this study underlines the efficiency of specialisation of crop production in areas where natural conditions are favourable and where farmers are more experienced in producing them.
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TRENDS IN CHINA'S REGIONAL GRAIN PRODUCT AND
THEIR IMPLICATIONS-96/10
Yang Hong
The paper examines trends in China's regional grain production during the reform period and their impact on national grain output and interregional grain transfers. It finds that there are significant variations between regions in terms of magnitude and patterns of growth. In general, northern regions experienced a faster growth than southern regions. There is a tendency to shift grain production centres towards the north, resulting in a modification of crop composition in total national output. The share of wheat and maize increased whereas the share of rice decreased. In the meantime, the shift has also led to a change in the prevailing direction of grain flows in interregional transfers. The traditional south-north flow is being replaced by a shift in the opposite direction. An analysis of regional trends in sown areas and yields, however, suggests that for China as a whole, the potential for further increasing grain output is limited under the current level of technology and socio-economic conditions. This, together with the remaining low level of per capita grain output, means a struggle for China to meet its grain demand in the future.
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CHINA'S MAIZE PRODUCTION AND SUPPLY FROM A PROVINCIAL
PERSPECTIVE-96/11
Yang Hong
China's maize production has experienced rapid growth during the period of on-going economic reforms. However, the magnitude of the growth has varied across regions. The bulk of the increased output has been generated from a few large producing provinces, whereas the increase in other provinces as a whole has been modest. During this period, the general situation of China's domestic maize supply has been dominated by the performance of the few large producing provinces, while China's role in the international maize market has been determined by even fewer of them. Given this fact, government policies in favour of production in these provinces are of significance for further increasing China's total maize output and stabilising the market supply.
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CHINA'S RURAL AND AGRICULTURAL REFORMS: SUCCESSES
AND FAILURES-96/12
D Gale Johnson
The agricultural and rural reform process that started in 1979 has seen far more success than failure. Yet we should not neglect the important shortcomings of the reform process, especially since the future of China's food supply is involved. In this paper, I shall address both aspects of the reforms. The rural reforms have been remarkably successful in several very important ways - increasing agricultural production, increasing the quality and variety of foods, and in increasing the real per capita incomes of farm people. The rapid development of the township and village enterprises and other forms of nonfarm enterprises has been beyond even what the wildest expectations might have been. The reforms have failed to reduce the significant income inequalities that have long existed in China - between rural and urban areas and regionally. In fact, both types of inequality are now greater than they were when the communes existed or even before 1949. The regional inequality has grown primarily in response to economic opportunities while the growing urban-rural inequality has been due to deliberate policy decisions. The urban bias in China is very strong and, unfortunately, there is no indication that it is decreasing or is likely to do so in the future.
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THE SINO-JAPAN STEEL TRADE NEGOTIATIONS FRAMEWORK-96/13
Ian Dickson
A factor influencing China's integration with world steel markets is steel's status as a canalised or "designated" commodity under Chinese trade laws. Canalisation limits the number of enterprises permitted to engage in import operations. Canalisation is particularly strict in the case of steel imports from Japan, the largest country supplier of ferrous metal products to China. Until mid-1995, steel supplies were organised under a system of bi-yearly contract negations between the Chinese single-desk importer (Minmetals), and the six largest Japanese steel producers. The purpose of this paper is to outline the negotiations framework, canvassing sources of advantage to both the Japanese and Chinese sides. Reasons for a recent decline in Japanese support for the system are also discussed. An important observation is that the canalisation arrangements involved a process of bilateral monopoly bargaining between collusive Japanese suppliers and the sole Chinese distributor. Bargaining centred on the division of cost savings generated by the special size and nature of the business transacted between China and Japan.
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GRAIN SECTOR REFORM IN CHINA-97/1
Christopher Findlay
The stagnation of grain output per head in the 1990s in China raises questions about grain sector performance. This paper discusses the scope for further reforms to contribute to output growth. Opportunities for further reform in both input and output markets are identified. The potential contribution of research and development is also noted. The discussion is presented in the context of the forces for structural change in the economy associated with its rapid growth and industrialisation
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INTERNAL REFORM, BUDGET ISSUES AND THE INTERNATIONALISATION
OF THE GRAIN MARKET IN CHINA-97/2
Enjiang Cheng, Christopher Findlay and Andrew Watson
The aim of this paper is to review the reforms in the inter-regional transfer system for grain in China and to identify some of their implications. The budget effects of market reform at both central and provincial levels and the direct and indirect effect of the development of the internal marketing system on the forces for the integration of the domestic and international grain markets are the focus in the paper. We argue that, in analysing these interactions, it is helpful to think of China not as a single economy but as a group of provincial economies. In this context it is necessary to examine the level of autonomy at provincial level for the administration of grain sector policies and how local interests affect not only the patterns of internal trade but also the forces for the integration of this group of provincial economies with the world market.
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RISKS AND DOCUMENTARY CREDITS IN CHINA'S INTERNATIONAL
METALS TRADE-97/3
Ian Dickson
China's international trade in ferrous and non-ferrous metals products is not risk free. Of course, international trade is never entirely risk free, and practitioners are naturally concerned to adopt measures to mitigate risks. In practice, Documentary credits (otherwise known as letters of credit, or "LCs") are one of the standard instruments employed. It is well known that LCs are not "fail-safe", but foreign steel traders selling product to China have been saddled with a greater degree of risk than would "normally" be the case. Whilst there is no conclusive statistical evidence to prove that the number of contract disputes is higher for trade with China than for trade with other Asian countries, anecdotal evidence suggests that for the metals trade such may indeed be the case, at least for the 1993 to mid-1996 period. This paper investigates risk issues primarily from the perspective of the foreign exporter to China (although the position of foreigners importing from China is also examined), concentrating on credit and transfer risks. Systemic reasons affecting the contract performance of Chinese partners include the partially reformed nature of China's banking, trade and foreign exchange regimes.
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CHINA'S GRAIN DEMAND AND SUPPLY: TRADE IMPLICATIONS-97/4
Harry X Wu and Christopher Findlay
This study reviews research on China's grain demand and supply. The purpose is to comment on the outlook for China's trade in grain and grain-based food, but also to identify the sensitivities of the projections of China's grain demand to key parameters. The paper will therefore 1) review a set of projections of grain demand and trade, 2) examine studies of major factors considered to affect grain demand in China, 3) comment on some trade and production policy issues based on a new projection that takes into account the effect of changes in population structure. A simple supply side assumption is used in this study. Findlay (1996) contains more discussion of supply side issues. Work reported here on the demand side is largely based on the study by Wu and Wu (1994) using official urban household survey data as well as recent results obtained using CERC-MoA rural household survey data (Wu, 1997). Our particular interest in this paper is the sensitivity of the outlooks for consumption and therefore trade to changes in
- the structure of the population;
- the conversion rates of feed grain into meat.
The paper concludes with comments on possible variations in patterns of trade in grain and processed foods, including meat.
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THE INTERNATIONALISATION OF CHINA AND ITS IMPLICATIONS
FOR AUSTRALIA-97/5
Bijit Bora and Chen Chunlai
This paper examines the process and extent of China's commercial integration into the global economy through its trade and investment links. China's emergence as an economic entity appears to have been a result of combination of 'push' factors in capital rich economies such as the NIEs and 'pull' factors such as trade and investment liberalisation in China. This study showed that while the initial response by firms to the prospect of doing business in China was lukewarm, after a period of time to gauge the government response to investment, FDI has flowed into China at an extraordinary pace. The corporate response to a more open China is beginning to evolve from an initial entry strategy of establishing foreign affiliates to capitalise on cheap labour to market access investments, reflecting a maturing relationship. The study showed that there is scope for countries such as Australia to capitalise on these developments. However, in order to sustain the growth and momentum of FDI into China from Australia and other countries the Chinese government will have to continue to respond favourably to business by further liberalising its trade and investment regimes.
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PRODUCTIVITY OF CHINA'S RURAL INDUSTRY IN THE
1980'S-97/6
Jin Hehui and Du Zhixiong
Rural industry in China in the 1980s grew at the high annual rate of 28 percent, contributing 34 percent to national industrial output growth. By the end of 1990, the output value of the rural industry and the employment in this sector accounted for 30 and 57 percent of China's total industrial sector, respectively, and its export volume maintained a share of 23.7 percent of the national total. As the "leading sector" in market-oriented reforms, rural industry has played a key role in China's economic growth. But how did the productivity performance of this sector change when it expanded rapidly? This paper reports a preliminary investigation of the productivity growth of the rural industry. New estimates of input indexes and factor income shares for rural industrial enterprises are presented. Rural industry productivity performance is estimated and compared with that of state and collective industrial sectors. The results show the convergence of the partial productivities of labour, capital and intermediate inputs among sectors in post-reform China, indicating a tendency toward equalisation of returns to factors and market integration of rural and urban industrial sectors. Also total factor productivity in the rural industry has grown much faster than comparable measures for state and urban collective industry. An accelerating trend of productivity growth in the rural industry is also found.
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THE STOCK MARKET IN CHINA: PROBLEMS AND PROSPECTS
FOR DOMESTIC AND FOREIGN INVESTMENT-97/7
Lan Yisheng
The stock market reappeared in Mainland China in the late 1980s and since then has experienced a rapid growth. Listed companies increased from one dozen in early 1991 to over 600 in mid 1997. The market capitalisation increased from less than 10 billion to over 1300 billion renminbi yuan in the same period. The market has some unique features like different shares issued to state, enterprise, individual share holders; different purchasing costs and circulation regulation for these shares; and strictly segmented markets for domestic investors and foreign investors. High P/E ratios, high system risks and high transfer rates have also been the special features of this market. The Chinese government has formulated the four principles of stock market development, i.e., the legal system, supervision, self-discipline, and standardisation in order to normalize its stock market. This paper comments on these developments and examines recent policy changes.
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FOREIGN DIRECT INVESTMENT AND ECONOMIC DEVELOPMENT
IN GUANGDONG: PROBLEMS AND PROSPECTS-97/8
Lan Yisheng
Foreign direct investment has made an important contribution to Guangdong's impressive economic growth in the past 18 years and to its current leading position in China. Now, without preferential policies and some other advantages, Guangdong is facing more difficulties than before to attract FDI. However, with the achieved economic progress, better infrastructure, a more educated and skilled labour force, well-developed economic integration with Hong Kong and the close ties with overseas Chinese, if the provincial government's new policies of attracting FDI are carried out effectively, Guangdong will be able to keep its top position in China for hosting FDI and maintaining rapid economic growth for at least another decade.
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CHINA'S FISHERY INDUSTRY: PRODUCTION, CONSUMPTION
AND TRADE-97/9
Lan Yisheng & Peng Zhaoyang
China's fishery production has increased dramatically since 1979. Its per capita fishery products has risen from well below world average to above it. For the rapid growth of fishery production, the price of fishery products has been quite stable compared to other food prices. So fishery products have changed to ordinary food from used-to-be luxurious food. China's export of fishery products has increased impressively. Meanwhile its imports have also increased significantly as it has special demands for some species which it cannot produce.
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EVALUATION OF CHINA'S URBAN HOUSING REFORM-97/10
Yuan Shiming
China began its urban housing system reform in 1980. This paper will explore whether the reform has fulfilled the scheduled goals. In terms of urban housing availability, living space per capita is now more than double what it was before the reform, and living conditions have been improved. But, in terms of establishing a new urban housing system based on a market oriented economy, the reform has not completed its scheduled aims. First, the proportion of the housing investment by central or local governments and work units amounts to 80 percent of the total of urban housing investment. Second, due to dual-track housing prices, two housing markets exist: an 'internal housing market' and an 'open housing market'. The former still follows the old welfare system. The latter is limited to a very narrow range. Third, rent reform has not stimulated individual investment in housing and the rent for public housing still is subsidised by the government and by danwei's. The experience of China's housing reform has shown that the reform has not fundamentally changed the old housing system. Although the reform has made some gains, the results still fall short of the targets.
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FOREIGN DIRECT INVESTMENT AND TRADE: AN EMPIRICAL
INVESTIGATION OF THE EVIDENCE FROM CHINA-97/11
Chen Chunlai
The main objective of this study is to investigate the relationship between foreign direct investment (FDI) and trade and further to examine the impact of FDI on trade from the evidence of China. Some earlier theoretical work has predicted either a substitute or complementary relationship between FDI and trade yet some empirical studies have revealed a positive relationship between FDI and trade. In this study, using the recent FDI and trade data of China, we find that FDI has a positive impact both on China's provincial trade and on China's bilateral trade. It argues that given the overwhelming dominance of developing source countries and their labour-intensive investment pattern in China, FDI is mainly export-oriented and, therefore, has a positive impact on promoting China's international trade. JEL: F14, F21, C12
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THE LOCATION DETERMINANTS OF FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES-97/12
Chen Chunlai
Using an econometric regression analysis to test the hypotheses based on the location advantages of the theory of FDI, this paper investigated and answered two main questions: what are the location determinants of FDI inflows into developing countries and what is the relative performance of China in attracting FDI inflow as compared with other developing countries in general and as compared with its Asian neighbouring countries in particular? First, the study shows that given the ownership advantages and the internalisation advantages of the source countries, the location advantages of host countries are very important in determining the distribution of the magnitude of FDI inflows. Second, the regression results provided strong support for the acceptance of the hypotheses. The main findings are: countries with larger market size, faster economic growth, higher per capita income, a higher level of FDI stock and more liberalised trade policies represented by a higher degree of openness attracted relatively more FDI inflows, while higher efficiency wages and greater remoteness from the rest of the world deterred FDI inflows. Third, by using the statistical model as an empirical norm, the study found that China's relative performance in attracting FDI inflow was only at a level moderately above average both among the developing countries and among the East and South-East Asian countries. Therefore, despite the fact that China is the largest FDI recipient among the developing countries and has attracted a large amount of FDI inflow in absolute dollars, in terms of its huge market size, fast economic growth, low labour costs and other economic and geographical characteristics, China received only its fair share of FDI inflows into developing countries, or at most marginally more than its potential from 1987 to 1994.
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THE COMPOSITION AND LOCATION DETERMINANTS OF
FOREIGN DIRECT INVESTMENT IN CHINA'S MANUFACTURING-97/13
Chen Chunlai
The manufacturing sector has been the most important and the largest recipient of foreign direct investment (FDI) in China since 1979. This article examines the composition and the location determinants of FDI in China's manufacturing. The study shows that FDI in China's manufacturing is mainly concentrated in the labour-intensive, fast growing and export-oriented industries. Using regression analysis with the latest data, the study reveals that FDI is higher where there is access to resources of China's comparative advantage in general, and where it provides access to local resource endowments in the case of relatively labour-intensive activities in particular. The analysis also reveals that industries with larger market size and higher growth rate attracted relatively more inward FDI stocks.
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COMPARISON OF INVESTMENT BEHAVIOUR OF SOURCE
COUNTRIES IN CHINA-97/14
Chen Chunlai
Foreign direct investment in China by country of origin, on the one hand, presents significant diversification in terms of the total number of investing countries; on the other hand, it also shows great concentration in terms of the overwhelming dominance of developing source countries, particularly the Asian Newly Industrialising Economies. This article aims to explore the characteristics and investment behaviour of the major source countries and, in particular, to compare the differences in investment behaviour of the two source country groups of developing and developed source countries. It argues that because of the differences in economic and technological development levels, developing and developed country investors should have differences in their investment behaviour. This study revealed several main differences in investment behaviour in terms of investment pattern, mode of entry, export propensity and the use of production technology between developing and developed source countries in China.
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THE EVOLUTION AND MAIN FEATURES OF CHINA'S FOREIGN
DIRECT INVESTMENT POLICIES-97/15
Chen Chunlai
This paper examines the evolution and the main features of China's inward foreign direct investment policies implemented since 1979. The paper reveals that in all the policy aspects relating to FDI China has taken a positive but gradual reform approach. This has been demonstrated by the gradual shifts from the establishment of the four SEZs to the nationwide implementation of open policies for FDI, from granting permission for joint ventures to allowing wholly foreign owned enterprises, from tight foreign exchange control to RMB convertibility on current account and from offering tax incentives to attract FDI to the application of national treatment. Despite the limitations, this reform process has proved both politically necessary and empirically successful. The gradual changes to China's FDI policies clearly indicate that China has continued to express a strong desire to stimulate and guide its economic development through promoting a more liberalised legal and policy environment to attract FDI and through further pursuing economic reform to establish a more market-oriented economy.
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PROVINCIAL CHARACTERISTICS AND FOREIGN DIRECT
INVESTMENT LOCATION DECISION WITHIN CHINA-97/16
Chen Chunlai
Using panel data, a multiple regression model of the location decision of foreign direct investment (FDI) in China is developed and estimated. The results for the period of 1987-94 of China's 29 provinces indicate that provinces with higher GDP, higher per capita income, higher level of accumulated FDI stock, and more intensive transport infrastructure attracted relatively more FDI inflows, while higher efficiency wages deterred FDI inflows. In addition, the regional differentiation in the timing of implementing the open policies for FDI had a strong impact on the provincial distribution of FDI inflows. Finally the implementation of a series of policy measures in the early 1990s had a very strong positive effect on attracting FDI inflows into China across all provinces.
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TESTING THE HYPOTHESIS OF IRRATIONAL EXUBERANCE
IN CHINA'S STEEL IMPORTS, 1992-1996-97/17
Ian Dickson
This paper outlines and applies a methodology for testing the hypothesis, put forward by Chinese metallurgical industry officials, that steel imports into China during the period 1992-1996 were exuberant or "blind". Domestic Chinese industrialists, who had a vested interest in protecting the home steel market from competing imports, believed that traders were importing such a large volume of steel product that it spoilt the market for both domestic producers and importers alike. In other words, traders were considered irrational and as acting contrary to their own self-interests. The methodology used to empirically test this hypothesis was developed by Spiller & Huang (1986) and by Sexton, Kling & Carman (1991), has its genesis in the production frontier work of Aigner, Lovell and Schmidt (1977), and has been labelled the "Parity Bounds Model" (PBM). The methodology is further extended and adapted in the present paper. The main findings of this paper include that the PBM model has a sound, logical and intuitively appealing derivation, but that feasibility of estimation is a significant problem with the model. However, if this and other problems are momentarily put aside, statistical tests using the model suggest only lukewarm support for the proposition put forward by Chinese metallurgical industry officials that steel importers were acting in a "blind", irrational or counter-productive manner.
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CHINA'S MYRIAD CUSTOMS REGIMES AND THEIR IMPLICATIONS
FOR OPENNESS (WITH REFERENCE TO STEEL IMPORTS)-97/18
Ian Dickson
The aim of this paper is to provide an institutional outline of China's various Customs regimes. According to recent data, only approximately one-third of China's imports were subject to "ordinary" rates of duty and to "ordinary" non-tariff barriers, rules and regulations. A large proportion of merchandise imports are exempt from "ordinary" or "normal" requirements. These exemptions come into play when the importers can demonstrate that the imported goods are sourced from particular countries or locations, or will be used for prescribed purposes (most notably, export processing and capital goods imports). Although such institutional arrangements are common to many countries, the degree and extent of their application in China is seemingly without parallel. The importance of these arrangements in China's case holds qualitative implications for how China's trade policy should be viewed, and also for assessments of China's "openness" to foreign trade. In the present paper, the impact of the various regimes is illustrated with reference to their affect on imports of iron and steel products into the Chinese mainland.
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KEY ISSUES IN ESTABLISHING A NEW HOUSING
SYSTEM BASED ON A MARKET ORIENTED ECONOMY-98/1
Yuan Shiming
China began its urban housing system reform in 1980. This reform has experienced four stages: decentralisation in housing investment, sale of urban housing, experiments with low rent reforms and implementation of the urban housing system reform all over the country. During this process, living space per capita has more than doubled and living conditions have been improved. Although there is some progress in implementing multiple channels of housing investment, selling public housing and raising rents in order to change economic mechanisms between the supply and demand for urban housing, reform towards a newurban housing system based on the market - oriented economy has not achieved its scheduled aims. In this paper, it is argued that further reforms should focus on four aspects: 1) setting rational housing prices based on wage system reform and the affordability for residents, 2) clarifying and legislating for property rights, 3) creating independent and socialised housing management companies and 4) establishing an efficient housing finance system.
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THE DYNAMICS AND IMPACT OF THE DEVELOPMENT OF
RURAL COOPERATIVE FUNDS (RCFs) IN CHINA-98/2
Du Zhixiong
Chinese Rural Cooperative Funds (RCFs) were developed to meet the needs of rural economic development during the extensive reform of the rural economy system in the mid 1980s. From their trial establishment in 1984, and since 1991 in particular, RCFs have expanded rapidly in terms of portfolio and extent of business, and become an important component of the Chinese rural capital market. Establishment of the RCFs challenged the conventional rural financial system notwithstanding the fact that the extent of fund raising and the target and availability of loans by RCFs, and so on, were rigidly constrained in the beginning. In practice, more than 10 years' operation of RCFs has positively and profoundly impacted on the rural capital market and on the reform of the rural financial system though it still faces many development problems. These resulted in RCFs being frequently blamed with disordering the financial market, the rural financial market in particular, during the period of rectifying the macro-finance. This paper briefly reviews the origin and background of RCFs as well as their evolution and policy environment. It also analyses the features and business operation of RCFs and assesses their contribution to rural economic development. The paper discusses the problems existing in the practice of RCFs and reviews their prospects. At present, rural non-bank financial institutions have become an important feature of the rural financial system in China's underdeveloped areas. This article analyses the current situation and basic characteristics of such institutions based on a survey conducted in 1997 in a county in Henan Province. To a certain extent, this case study reflects some of the common problems and features of rural financial development in underdeveloped areas in China.
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ENTERPRISE REFORM AND EMPLOYMENT CHANGE IN SHAANXI
PROVINCE-98/3
Andrew Watson
This article focuses on the impact of state enterprise reform on employment in Shaanxi province. Two issues are seen as of major importance. The reform of property rights and the reorganisation of state enterprise assets are changing the relationship between labour and capital in ways which are making it easier for enterprises to shed labour. The blurring of the barriers between urban and rural labour is creating more direct competition between the two which is forcing urban labour to accept lower standards of benefits and payments. State enterprise reform in Shaanxi is also constrained by the relatively low level of development and the slowness of change in the structure of the local economy. As a result, Shaanxi is experiencing a huge surge in unemployment. It is argued that the fact that the burdens of state enterprise reform are borne at the local level means that there are large disparities in the capacity of different regions to make the adjustment and to provide support for those who become unemployed.
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RURAL NON-BANK FINANCIAL INSTITUTIONS IN UNDERDEVELOPED
AREAS - A CASE STUDY OF A COUNTY OF HENAN PROVINCE-98/4
Chen Jiyuan, Zhu Gang, Liu Yuman
At present, rural non-bank financial institutions have become an important feature of the rural financial system in China's underdeveloped areas. This article analyses the current situation and basic characteristics of such institutions based on a survey conducted in 1997 in a county in Henan Province. To a certain extent, this case study reflects some of the common problems and features of rural financial development in underdeveloped areas in China.
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HOUSEHOLD HEADS, NON-ECONOMIC FACTORS AND GRAIN
PRODUCTION IN CHINA IN THE 1990s-98/5
Enjiang Cheng
The omission of relevant independent variables in the estimation of agricultural production functions gives rise to mis-specification and biased estimators. Using disaggregated household survey data, this study finds that official positions and education of household heads are important determinant of grain output in rural China and should be incorporated into the production functions. The impact of non-economic factors on grain output is caused mainly by the imperfections in the market for farm inputs and collective ownership of large productive assets for farm production. Policy implications are drawn for further reforms in China's grain markets and rural administration system.
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