Pre-commitment vs. flexibility : uncertainty and distribution reform in P.R. China

The Chinese economic reform is remarkably different from the East European reforms in which the Chinese model emphasizes competition over privatization. This paper explains why the Chinese distribution reform is successful, although the Chinese government has made no attempt in privatizing her inefficient state-owned enterprises. By extending Coughlan\u27s (1 985) price competition model to endogenize the pre-commitment versus flexibility decision, it is shown that reducing uncertainty can encourage enterprises to pre-commit their investment which allows further development of the retail sectors. This results supports the gradual pace of distribution reform policy of China. By contrast, the \u27renolutionary\u27 East European model inevitably creates high uncertainty in the society and enterprises are unwilling to pre-commit their investment

Can job turnover improve technical efficiency? : a study of state-owned enterprises in Shanghai

This paper studies the relationship between job turnover and technical efficiency of state-owned enterprise (SOEs) in Shanghai\u27s manufacturing sector during the period of 1989-1992. Data Envelopment Analysis (DEA) is used to compute measure of technical efficiency for each enterprise. Our findings indicate that, for non-expanding SOEs, the relationship between job turnover (i.e., downsizing) and technical efficiency is a U-shaped one such that efficiency declines at low levels of turnover,but after a certain level, it starts to increase. In addition, we show that small non-expanding SOEs (i.e., with employment size less than 100) start to increase their efficiency at a lower level of turnover than other medium and large SOEs. We also find that for medium and large expanding SOEs, the turnover-efficiency relationship is a positive and linear one

Profitability and technical efficiency : a performance evaluation of international joint ventures in Shanghai\u27s manufacturing industries

This paper studies the relationship between accounting profits and efficiency of manufacturing enterprises in Shanghai during the period of 1989-1992 and examines which factors affect the profitability of manufacturing enterprises. In 1990, the industrial reform was sped up, a Chow test is used to test for the presence of any structural break and our empirical test confirms its presence. In addition, this paper also tests for the presence of ownership effects on profits. Our results indicate that the profits of international joint ventures are more persistent than the rest of ownership types and industries

Small businesses and liquidity constraints in financing business investment : evidence from Shanghai\u27s manufacturing sector

This paper studies the relationship between investment and internal funds in the manufacturing sector of Shanghai with a focus on the relationship between firm size and liquidity constraints faced by manufacturing firms. By using a firm level data set in the Chinese economy in transition, we obtain a different result which contradicts the conventional wisdom that smaller firms should face a tighter liquidity constraint: Larger firms actually are more cash-constrained than smaller firms. This result is actually caused by some institutional features which are common among transition economies: (1) Facing less available means of external finance from the state banking system, small firms which are better managed and more efficient may be able to generate large enough cash flow to finance their fixed investment. (2) The presence of heavy indebtedness of large state-owned enterprises may deprive them of sufficient cash available for investment decision. Given that the state-owned enterprise have been making heavy losses, the central and regional governments have liquidity problem in satisfying their huge liquidity demands. (3) Small enterprises in non-state sector can rely on borrowing from the informal credit market although they can obtain very limited bank credit from the formal banking institutions

Hedging and nonlinear risk exposure

This paper documents some empirical evidence of nonlinear spot-futures exchange rates relationships and develops an expected utility model of an exporting firm to examines the associated economic implications. The model shows that the firm should export more (less) and adopt an over (under) hedge in an unbiased currency futures market if the spot-futures exchange rates relationship is convex (concave) rather than linear. When fairly priced currency options on futures are available, the firm should use them in conjunction with the currency futures so as to achieve better hedging against its nonlinear exchange rate risk exposure. This provides a rationale for the hedging role of options when the underlying uncertainty is nonlinear in nature

Private businesses in China : emerging environment and managerial behavior

This paper reviews the development and contribution of private businesses to the Chinese economy. The political and market environment are analyzed to picture the current position of private businesses in the national economy. Major characteristics of private businesses and their owners are presented through three survey results conducted in different periods. Managerial implications, in terms of macro environment, competition, resources, management structure and governance, and leadership and human resources are discussed

Consumption patterns of entrepreneurs in the People\u27s Republic of China

Since the implementation of economic reforms in 1978 in the People\u27s Republic of China, entrepreneurs have emerged as a new consumer group. With rising income and high consumption power, entrepreneurs have become major consumers for expensive goods and services. However, little research has been carried out to understand their consumption decisions. In this paper, we study the consumption patterns of small business .owners, getihu, in China by using a set of large-scale, nation-wide survey data. Their consumption is postulated to be affected by (1) risk factors which include failure risk and financial (leverage) risk, (2) household variables such as the household size, financial and labor resources in the family, (3) the future plans of their business, and (4) home ownership. The effects of these factors on consumption patterns are evaluated. Our empirical results, based on regression and Tobit analysis, showed that all these factors are important in the consumption decisions of the entrepreneurs\u27 households. In particular, risk and household factors are statistically significant in accounting for the variations in their consumption patterns. The marketing implications are also discussed

Job turnover in China : a case study of Shanghai\u27s manufacturing enterprises

This paper studies the job turnover among manufacturing enterprises in Shanghai during the period from 1989 to 1992. Various indicators of job turnover, including job expansion rate, job contraction rate, net job growth rate, gross job reallocation rate, and excess job reallocation rate are calculated. The empirical results demonstrate that types of ownership and firm size are significant factors in accounting for the changes in job generation and job reallocation. Among various types of enterprise, international joint ventures and small firms (i.e., those that employ less than 100 workers) are more able to create jobs and to generate job reallocation

Profitability, ownership structure and technical efficiency of enterprises in P.R. China : a case of manufacturing industries in Shanghai

This paper studies the relationship between accounting profits and technical efficiency of manufacturing enterprises in Shanghai during the period of 1989-1992 and examines which factors affect the profitability of manufacturing enterprises. We first estimate the average technical efficiency of four major manufacturing industries in Shanghai. Then, we test for the presence of ownership effects of technical efficiency on profits of those enterprises in these four industries