Why has China grown so fast? The role of physical and human capital formation

Cross-province growth regressions for China are estimated for the reform period. Two research questions are asked. Can the regressions help us to understand why China as a whole has grown so fast? What types of investment matter for China's growth? We address the problem of model uncertainty by adopting two approaches to model selection to consider a wide range of candidate predictors of growth. Starting from the baseline equation, the growth impact of physical and human capital is examined using panel data techniques. Both forms of capital promote economic growth. ‘Investment in innovation’ and private investment are found to be particularly important. Secondary school enrolment contributes to growth, and higher education enrolment even more so

Managing the interface between public sector applied research and technological development in the Chinese enterprise sector

China's technological capabilities are emerging rapidly and the country will become a major challenger to established nations in terms of R&D and innovation in the near future. For the moment, however, contradictory signals emerge from the Chinese economy leaving experts pondering about the country's true potential for technological upgrading on a broad scale. The integration of the domestic research system, international technology transfer, and technological development remains limited to a few high-tech companies, while large segments of the domestic private sector have limited access to knowledge and technologies to upgrade their activities. --China,Guangdong,interface,knowledge supply,knowledge demand,regional innovation system,science-industry relations

Regional innovation and spillover effects of foreign direct investment in China: a threshold approach

Using a data set on twenty-nine Chinese provinces for the period 1985–2008, this paper establishes a threshold model to analyse the relationship between spillover effects of foreign direct investment (FDI) and regional innovation in China. There is clear evidence of double-threshold effects of regional innovation on productivity spillovers from FDI. Specifically, only when the level of regional innovation reaches the minimum innovation threshold will FDI in the region begin to produce positive productivity spillovers. Furthermore, positive productivity spillovers from FDI will be substantial only when the level of regional innovation attains a higher threshold. The double threshold divides Chinese provinces into three super-regions in terms of innovation, with most provinces positioned within the middle-level innovation super-region. Policy implications are discussed

Technology, Innovation and Latecomer Strategies: Evidence from the Mobile Handset Manufacturing Sector in China

Since the entry of Chinese domestic mobile handset manufacturers in 1998, Chinese domestic suppliers have successfully surpassed the market share of joint ventures (JVs) while direct imports have been largely phased out. By examining China’s mobile handset manufacturing sector as a whole and through case studies, we found several factors that contributed to the success of China’s domestic handset manufacturers which can be classified into three categories: market conditions, competition, and government’s support.

Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms

This research examines the factors determining whether or not exporting firms expand to outward foreign direct investment (OFDI) as part of their internationalisation strategy, using a recent survey of Chinese private-owned enterprises. We carry out a multi-dimensional analysis to investigate the impact of firm productivity, internal resources and the external environment on OFDI decisions, including both the decision to undertake OFDI and the volume of OFDI flows. It is found that productivity, technology-based capability, export experience, industry entry barriers, subnational institutions and intermediary institutional support affect firms’ OFDI decisions. The findings have important policy and managerial implications

The Strawberry Growth Underneath the Nettle: the emergence of entrepreneurs in China

Chinese entrepreneurs innovatively manage organisations in the absence of strong economic institutions, under conditions of high environmental and technological uncertainty. This paper presents the findings of an empirical study designed to investigate how Chinese entrepreneurs can be successful in such an environment. We found that Chinese entrepreneurial activity relies on social institutions rather than on economic institutions. We offer a sociological theory which explains why the reliance on social institutions leads to such an unprecedented success. We conclude that the strong rule-enforcement mechanisms generate reliable behavioral patterns, and that these in turn efficiently reduce uncertainty to tolerable levels.networks;social capital;evolutionary economics;Comparative business systems;private sector in China

Chinese Enterprise Reform as a Market Process

The reform of China's enterprise system increasingly reflects the outcome of China's emerging property rights market. We distinguish between a centrally-directed reform strategy, with characteristics similar to those of a Pigouvian tax, and a market-driven reform process, which captures the essential features of a Coasian approach to social cost. The Coase Theorem postulates that eliminating transaction costs and attaching well specified property rights to public goods that generate externalities will allow uncoordinated economic agents to negotiate institutional arrangements that produce socially efficient allocation of resources. Extending Coase's reasoning to the case of socialist transition ' we argue that reforms that expand competition, move toward well-specified assignment of ownership rights to public enterprises, and reduce transaction costs will motivate the "ultimate" owners, including officials of national and sub-national government agencies, to reconfigure their assets or to combine their assets with those of other jurisdictions and/or private investors to create more efficient ownership arrangements. We review the extent to which China's reforms have established the conditions for an effective market in ownership rights to industrial property. We tabulate progress from 1 980 to present along the three major analytic dimensions inherent in Coase's analysis: competition, property rights, and transaction costs. We conclude that the sheer size and diversity of China's industrial economy will motivate a continuation of decentralized reform initiatives. To support this Coasian reform process, central and provincial governments need to expand initiatives to clarify property rights, particularly the right of alienation, reduce impediments to competition, and facilitate the reduction of transaction costs.http://deepblue.lib.umich.edu/bitstream/2027.42/39466/3/wp76.pd

Human Capital, Education, and Entrepreneurs: Evidence from the Yangtze River Delta

This paper seeks to examine the relationship between education demand and entrepreneurs in the process of enhancing the growth of human capital in China. We develop a theoretical model that incorporates the important roles played by human capital, education and entrepreneurs. Then, we derive an immigration condition under which the demand for education depends on the existence of entrepreneurs. Finally, we test whether this condition holds true in China, using a panel data set from the Yangtze River Delta which is considered a key barometer of Chinese economy. The empirical results reveal a significant positive relationship between entrepreneurs and education demand in the Yangtze River Delta, suggesting that if we can find ways to promote the growth of entrepreneurial endeavors, we could spur the growth of education demand and further drive human capital accumulation in China

Can China’s Growth be Sustained? A Productivity Perspective

China’s gradual approach to economic transition has resulted in sustained high growth. However, in recent years Chinese economists have increasingly referred to the growth pattern as “extensive,” generated mainly through the expansion of inputs. Our investigation of the Chinese economy during the reform period finds that reform measures often resulted in one-time level effects on total factor productivity (TFP). China now needs to adjust its reform program toward sustained increases in productivity. Market and ownership reforms, and open door policies have improved the conditions under which Chinese firms operate, but further institutional reforms are required to consolidate China’s move to a full-fledged market economy

Framing China: Transformation and Institutional Change

The paper offers a frame for investigating the extent to which decentralisation, and subsequent locally chosen institutions shape private organisational and institutional innovation. To include the numerous locally based “economic regimes†matters as the resulting business system reflects political institution setting and private organisational innovation. Such a frame is a necessary first step for empirical studies attempting to explain the heterogeneity of China’s business systems, the emergence of hybrid organisations, and last but none the least, the different growth rates that can be observed across China.Transition Economy;Institutional Change in China;Private Business Sector