A quantitative description of the Chinese economy, 1960-2004 · 2014. 6. 30. · 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 Birth

A quantitative description of the Chinese economy, 1960-2004

NZIER working paper 2005/03 Public discussion document

December 2005

Preface

NZIER is a specialist consulting firm that uses applied economic research and analysis to provide a wide range of strategic advice to clients in the public and private sectors, throughout New Zealand and Australia, and further afield.

NZIER is also known for its long-established Quarterly Survey of Business Opinion and Quarterly Predictions.

Our aim is to be the premier centre of applied economic research in New Zealand. We pride ourselves on our reputation for independence and delivering quality analysis in the right form, and at the right time, for our clients. We ensure quality through teamwork on individual projects, critical review at internal seminars, and by peer review at various stages through a project by a senior staff member otherwise not involved in the project.

NZIER was established in 1958.

Authorship

This report has been prepared at NZIER by Alice Wang and reviewed by Brent Layton. The assistance of John Stephenson, Jessica Matthewson, Sarah Spring and Chris Nixon is gratefully acknowledged. The author would also like to thank Prof. Jikun Huang from the Centre for Chinese Agricultural Policy, Chinese Academy of Science, Dr. Tao Ran from Oxford University and Dr. Liu Mingxing from Peking University, Prof. Zhang Jun from Fudan University, Dr. Kui-Wai Li from City University of Hong Kong and Sze-Kiat Bong from the National Institute of Studies for their comments and assistance with capital stock data.

NZIER – Working paper 2005/03 i

Contents 1. Introduction .............................................................................................. 1

2. Population................................................................................................. 1

3. Economic growth ..................................................................................... 6

4. Factors of production ............................................................................ 11

4.1 Capital stock ........................................................................................ 11

4.2 Labour force......................................................................................... 13

4.3 Productivity .......................................................................................... 15

5. Conclusion.............................................................................................. 16

Appendices Appendix A References ................................................................................. 17

Figures Figure 1 Population in the PRC, 1961-2004 ....................................................... 2

Figure 2 Natural growth rate of population in the PRC, 1960-2003 .................... 2

Figure 3 Total and net natural population growth rates in the PRC, 1961-2003.......................................................................................... 4

Figure 4 Demographic structure of population in the PRC, 1960-2004............... 4

Figure 5 Population growth by age group in the PRC, 1960-2004...................... 5

Figure 6 dependency ratios in the PRC, 1960-2004........................................... 6

Figure 7 GDP deflator in the PRC, 1960-2004 ................................................... 7

Figure 8 Real GDP in PRC, 1960-2004 .............................................................. 8

Figure 9 Share of GDP by sectors in the PRC, 1960-2004................................. 8

Figure 10 Growth of real GDP by sectors ........................................................... 9

Figure 11 Real GDP per capita in PRC, 1960-2003 ......................................... 10

Figure 12 Real capital stock in the PRC, 1960-2003 ........................................ 12

Figure 13 Labour force in the PRC, 1960-2003 ................................................ 13

Figure 14 Input productivity in the PRC, 1960-2003 ......................................... 15

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Figure 15 Growth of input productivity in the PRC............................................ 15

Tables Table 1 World Bank’s estimates of China’s urban unemployment rate............. 14

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1. Introduction The Peoples’ Republic of China (the PRC) is increasingly recognised as a dormant economic giant. The robust growth of the Chinese economy since the late 1970s has been an active topic in the media and has attracted a considerable amount of attention from all over the world. Economists are curious about the success behind the “rise of China”. It is commonly believed that the “rise” was nurtured by the economic reform launched in 1978, which brought structural changes in the PRC across all industries. The reforms are considered to have been the watershed in the gradual transformation from a centrally planned economy to a market orientated economy.

The pressure created by the transformation has been stimulating enormous demands from the Chinese for knowledge and expertise. This has impacted the education, technology, finance, manufacturing and agriculture sectors, in both domestic and overseas markets. Today, the PRC is seeking, as well as offering, potential opportunities in the global market as a rising economic power.

This report attempts to sketch the history of the Chinese economy using some key economic data, as well as uncover some “stories” behind the data. The target audience is those who are interested in gaining background information about the resurgence of China. The descriptive overview of the economy covers the period 1960 to 2003.

The following section describes the dynamics in the Chinese population and demographic structure. Section 3 looks into the economic output, in aggregate as well as by sectors. Next, two major factors of production are presented; labour and capital stock. Finally, a summary of this paper is outlined in Section 5. Most data used in this report was obtained from the World Development Indicator (WDI) database provided by the World Bank.1

2. Population According to the latest statistics release by the CIA in The World Factbook, the Chinese population was over 1.3 billion in July 2005, which accounts for more than 20 percent of the world population.2 The country experienced its most explosive population expansion in the 1960s, with an average population growth rate of 2.5 percent per annum. From the early 1970s, however, the growth rate started to decline sharply. Throughout the 1970s 1 While the United Nation’s statistical database has 34 data series covering 1970-2003, the World

Bank’s data is used here because of longer time horizon coverage and wider series range. 2 Available online: http://www.cia.gov/cia/publications/factbook/geos/ch.html

NZIER – Working paper 2005/03 1

http://www.cia.gov/cia/publications/factbook/geos/ch.html

and 1980s the growth averaged 1.3 percent per annum. In 2002, the rate had fallen to 0.6 percent.

Figure 1 Population in the PRC, 1961-2004

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5Total population

Population growth % (RHS)

Source: World Development Indicator, The World Bank

Figure 2 illustrates the natural population growth rate decomposed according to the contribution from the birth rate and the death rate.

Figure 2 Natural growth rate of population in the PRC, 1960-2003 Annual, number per 1000 people

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000

Birth rate

Death rate

Source: World Development Indicator, The World Bank; The World Factbook, Central Intelligence Agency; China Internet Information Centre, www.china.org.cn

The natural population growth rate is simply the difference between the two. There was a sharp plunge in the birth rate from 4.3 percent in 1963 to reach 1.8 percent in 1978; it has averaged 1.8 percent since then with the recent


http://www.china.org.cn/

trend being for it to decline. The death rate, which was unusually high in the early 1960s, fell from 2.5 percent in 1960 to 1 percent within 2 years and remained below 1 percent from the late 1960s.

The death rate in 1960 was strikingly high; almost three times the level of two years later and during the rest of the period studied. It is estimated that more than 30 million people died in a famine which was largely due to the “Great Leap Forward” campaign conducted between 1958 and 1960. The campaign focussed on increasing steel production across the country and the establishment of the Peoples’ Communes.

The goal of the “Great Leap Forward” campaign was to dramatically raise the country’s economic power and do that in just a few years. Thousands of peasants were forced to leave the fields to work in the new steel mills. However, mismatched labour skills in the steel production sector led to poor quality output and dislocation of labour from the food production sector resulted in poor harvests and starvation.

The Peoples’ Communes were established in 1958 and were responsible for assigning production to peasants according to state quotas. Peasants were paid for the aggregation of fulfilled quotas rather than individual output.

As a consequence, the system provided weak incentives to improve productivity and food production sank further. In addition to the shortfall in food production and severe starvation, natural disasters such as earthquakes, drought, floods and pests struck between 1959 and 1961. As a result, the economy deteriorated to the point of collapse and approximately 30 million people died in the ensuing famine.3

In Figure 3 the dotted line is the natural rate of population growth and the solid line represents the total growth. The migration rate may be inferred by deducting the natural growth rate from the total. Except in the early years of the period, migration has not been quantitatively an important factor in the population growth of the PRC. Part of the apparent role of migration in the early 1960s may also be due to deficiencies in the available data on births and deaths.

Prior to 1965 the number of Chinese who migrated overseas exceeded the number of foreigners who immigrated to China (see Figure 3, the dotted line lies above the solid line). However, between 1968 and 1979 the trend was reversed as more and more foreigners took up residence in the PRC and increasing numbers of overseas-Chinese returned to PRC. Since the late 1980s the number of migrations has almost equalled the number of immigrations (where the two lines overlap each other).

3 Some of the natural disasters were man-made. For instance, several species of birds that eat pests

were declared vermin and killed nation-wide. As a consequence, the enormous increase in the insect population resulted in crop losses. See more details http://phs.prs.k12.nj.us/~ewood/China2/


Figure 3 Total and net natural population growth rates in the PRC, 1961-2003 Annual, percent

-1.5

-1.0

-0.5

0.0

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1.0

1.5

2.0

2.5

3.0

3.5

4.0

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

Total population growth rate

Net natural population growth rate


Figure 4 categorises the Chinese population by three age groups: population aged 14 and younger (i.e. the young), population aged between 15 and 64 (i.e. working-age), and population aged 65 and older (i.e. the old).

Figure 4 Demographic structure of population in the PRC, 1960-2004 Annual, millions (both vertical axes)

200

300

400

500

600

700

800

900

1000

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 200020

30

40

50

60

70

80

90

100

Age 14 and below

Age 15-65

Age 65 and above (RHS)


One observation from Figure 4 is that the number of the old has been steadily increasing during the period studied, and the number of the young has not been growing as fast; in fact, the total number of the young has been


shrinking since the late 1970s, from 356 million in 1974 to 299 million in thirty years later.

Figure 5 Population growth by age group in the PRC, 1960-2004 Annual percent change

-4

-3

-2

-1

0

1

2

3

4

5

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

Age 14 and below

Age between 15-64

Age 65 and above


The growth rate of the young went negative in 1976 and stayed generally negative until 1996.4 It went over 0.3 percent between 1996 and 2000 but became negative again afterwards. Meanwhile, the rate of increase in the working-age group has also been shrinking, although at a relatively moderate rate. The old age group has attained the highest growth rate among all three groups since 1972, sitting on an average growth rate of over 3 percent per annum for three decades between 1972 and 2002. However, the rate of growth in the old age group has been declining in recent years.

The total dependency ratio is calculated as the sum of the number of people aged 14 and younger (the young) and 65 and older (the old), to the rest of the population. The dependency ratio gives us a numerical representation of demographic structure, specifically, the relationship between the number of dependents and the number of people in the prime working age group to support them.5 The general trend in the total dependency ratio is downward sloping. At the beginning of the study period, the proportion of the population who are dependents was 0.78, meaning 100 working-age for every 78 in the dependent age groups. This proportion decreased to 0.44 in 2004, meaning the same number of working-age for every 44 in the dependent age groups.

4 This is largely due to the implementation of the “one-child policy”, see explanation below. 5 A support ratio is the reciprocal of a dependency ratio. A support ratio shows how many people of

working age are supporting each dependent, and therefore is a useful tool in the economics of social security.


The total dependency ratio can be further decomposed into a young dependency ratio and elderly or age dependency ratio. The former is the ratio between the number of people aged 14 and below to the number of people aged between 15 and 64. The latter, which is calculated in a similar manner, only includes people aged 65 and above.

Figure 6 dependency ratios in the PRC, 1960-2004 Annual, percent (both vertical axes)

0.30

0.35

0.40

0.45

0.50

0.55

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0.65

0.70

0.75

0.80

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 20000.070

0.075

0.080

0.085

0.090

0.095

0.100

0.105

0.110

Young dependency ratio

Elderly dependency ratio (RHS)


Clearly the trend has been a decreasing young dependency ratio since 1975; a major influence has been the introduction of the “one child” policy.

In order to control the rate of increase in the population the Chinese government implemented the “one child policy” in the late 1970s. The policy gave incentives to enforce parents to have one child only. The government rewarded those who complied by granting a “one-child certificate” to recognise their contribution to the control of the population size. The certificate entitled holders to claim certain benefits. The available benefits included cash grants, free healthcare, better childcare and longer maternity leave. On the other hand, parents who did not comply with the restriction faced severe fines and increased healthcare expenses.

3. Economic growth The economic growth in the PRC has been spectacular and this section looks at the key macroeconomic data defining the phenomenon.

The GDP deflator is a tool to convert nominal GDP into real terms by removing the impact of inflation. It provides a measure of the domestic price level across all sectors of the economy.


Figure 7 GDP deflator in the PRC, 1960-2004

0

30

60

90

120

150

180

210

1960 1966 1972 1978 1984 1990 1996 2002-5

0

5

10

15

20

25

GDP deflator index (1990 base year)

Annual % change in GDP deflator (RHS)


There were turbulent fluctuations in the rate of change of the domestic price level, for example, from 0 to 20 percent between 1982 and 1994. One possible explanation for this could be that the Chinese economy was heating up as new reform policies were implemented and movement along the transition path progressed.

The transition process was first initiated by the concept of the “Four Modernisations” raised by Zhou Enlai in the mid-1960s (OECD, 2005). The concept looked into prospects that the Chinese economy needed to develop by modernizing agricultural, industry, national defence and science and technology.

During the 1980s Deng Xiaoping initiated the development strategy of “Three Steps” and the reform process to support it. The first step was to double the level of real GDP during the 1980s and ensure the most basic living standard was attained for all, i.e. clothing and food (short-term goal). The second step was to quadruple the 1980 real GDP level by the year 2000 (medium-term goal). The third step was to raise GDP per capita within the following 30 to 50 years to the level of an intermediate developed country (long-term goal).

The first two steps have been successfully completed. Figure 8 shows that the real GDP more than doubled in the 1980s and more than quadrupled by the year 2000.

Figure 9 traces the share of GDP for each of the three major sectors: agricultural, industrial and services. The impact of the famine in 1960 on the share of primary production in the early 1960s is one feature. Another trend is the decreasing share of the agricultural sector since the late 1960s.


Figure 8 Real GDP in PRC, 1960-2004

0

1,000

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6,000

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1960 1966 1972 1978 1984 1990 1996 2002

Bill

ions

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-5

5

15

25

GDP (constant 1990, RMB)

R.GDP annual growth % (RHS)


The secondary sector grew relative to the other two sectors and has been the largest since 1970 at over 40 percent, and on average of over 46 percent through to 2004. The share of the tertiary sector remained stable at an average of 25 percent between the 1960s and early 1980s. The share increased gradually to over 28 percent in 1985 after some recovery post-cultural revolution (see explanations below).

Figure 9 Share of GDP by sectors in the PRC, 1960-2004 Annual, percent

0

10

20

30

40

50

60

1960 1966 1972 1978 1984 1990 1996 2002

Agriculture Industry Service


Figure 10 shows the rates of growth of real GDP by three major sectors. The rates were particularly volatile across all sectors during the 1960s and the 1970s. Take the secondary sector during the period 1966 to 1969 for example. The annual growth plunged from 22 percent in 1966 to negative


14 percent in 1967 and negative 9 percent 1968, then climbed up to 33 percent in 1969. The secondary sector performed well with steady significant growth during the 1980s and 1990s. In the two decades between 1984 and 2004, the sector scored an average growth of over 12 percent and almost-doubled real output, reaching over 772 billion RMB in 2004 (in 1990 prices).

Figure 10 Growth of real GDP by sectors Annual, percent

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-40

-20

0

20

40

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100

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

Primary Secondary Tertiary


Despite the rapid growth, China is still a developing country. The living standard measured by real GDP per capita (see Figure 11) is still low in China comparing with advanced countries. The overall growth in the real GDP per capita between 1963 and 1966 was strong, averaged at over 13 percent. But it did not last long. Growth became negative after 1967 and was very unstable during the early 1970s. There were reasons for this syndrome, the Culture Revolution was one of them.

The Culture Revolution was initiated in 1966 as Mao Zedong reassumed the centralisation of power after recovering from the failure of the “Great Leap Forward” campaign. The chief goals of the Cultural Revolution were to resist capitalism entering the country and to emphasize egalitarianism. Schools were closed down and teachers were sent into the fields to “reform through labour”. Libraries and universities were burnt down. In fact, any education that created inequality was swept away within days. The entire country was in chaos and the education system was disrupted for more than ten years.


Figure 11 Real GDP per capita in PRC, 1960-2003

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5000

6000

1960 1966 1972 1978 1984 1990 1996 2002-30

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0

5

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20

GDP per capita (constant 1990, RMB)

GDP per capita annual % growth (RHS)


The increasing growth in aggregate production began after 1978, as economic reform along with the implementation of the opening-up policy and expansion of education and research came into order, transforming the Chinese economy from a centrally planned state to a market oriented economy.

The ideology of Chairman Mao and the Cultural Revolution severely restrained the Chinese economy during the 1960s and 1970s.6 Meanwhile, the rapid economic development of the “four Tigers”, Taiwan, Hong Kong, Singapore and South Korea, were held up as successes of implementing the market system. Deng Xiaoping took over the leadership of the Communist Party in 1978 and was the first to propose a reform of the planning system.

The third plenum of the Eleventh Congress of the Communist Party of China (CPC) marked the commencement of the reform. The meeting shifted the focus from “class struggle” to “economic development”.

Activities in the agriculture sector have long played a crucial role in the development of the Chinese economy. In 1978, as part of the new reform, a contract system for agricultural production in rural areas was introduced. The contract system was known as the “household responsibility system”. The new system allowed peasants to claim residual output after fulfilling the production requirements of the state. Land was divided among peasants who received a “contract” and they were responsible for their own production. Under the new system, the residual income of the peasants depended on their effort and this link provided the incentive for peasants to take the 6 Hua Guofeng, the president during the mid-1970s, insisted “two whatevers”: “whatever decisions

Chairman Mao has made, we all support; whatever instructions Chairman Mao has given, we all follow.”


initiative. Agricultural reform was recognised as the first success of the new reform in China.7 Between 1978 and 1985 agricultural output increased by 67 percent.

Prior to the reform, the Chinese economy was severely isolated from overseas markets and trading activities. The opening-up was initiated in the eastern coastal areas and progressed gradually to central and western regions. In 1979, the Chinese government granted Guangdong and Fujian, two southern provinces that were geographically close to other Asian economies, special conditions such as lower tax and delegations to local authorities to promote foreign trade and investment.

4. Factors of production

4.1 Capital stock

The Chinese State Statistics Bureau does not publish official series on capital stock. Many academic studies have been done in the area of estimating the capital stock of China. Nehru and Dhareshwar (1993) estimated a series of total annual physical capital using original data from the World Development Indicator database produced by the World Bank. The database used by Nehru and Dhareshwar covered the years 1950-90 and 92 countries, including the PRC. However, their data is not readily available from the public domain.

Gregory Chow has published extensively on China’s economic growth in terms of labour, capital and total factor productivity. Chow (1993) estimated a series of capital stock between 1952 and 1985, Chow and Li (2002) extended that estimation to 1998. Due to inconsistent measurement and price index constructed over time in the source data, Chow and Li (2002) assumed a constant depreciation rates at 4 percent per annum for the period 1978-92 and averaged to be 4.4 percent from 1993 to 1998.

The World Development Indicator database that the World Bank hosts has a series of gross fixed capital formation covering between 1965 and 2004. To construct a data series of capital stock with an extended time coverage back to 1960, numerous data sources were used.

The series is constructed with two time fragments, 1960-1964 and 1965-2004. Prior to 1965, capital data are extracted and converted to 1990 prices from Chow and Li (2002) in which numbers were in 1978 prices. The capital stock in 1964 in Chow and Li (2002) connects two time fragments as the previous capital for the stock in 1965. From 1965 to 2004, the process of capital accumulation is assumed to be the summation of previous capital

7 See Qian (1999).


stock net of depreciation plus investment.8 Investment data, or gross fixed capital formation, is readily available from the World Bank. The depreciation rate is fixed at 4 percent as assumed in Chow and Li (2002), for the period 1965-2004.

Figure 12 Real capital stock in the PRC, 1960-2003

0

5,000

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15,000

20,000

25,000

1960 1966 1972 1978 1984 1990 1996 2002

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ions

0

2

4

6

8

10

12

14

Capital (constant 1990, RMB)

Capital annual growth % (RHS)

Source: Chow and Li (2002), World Development Indicator, NZIER

Figure 12 shows the synthesised capital series for the PRC between 1960 and 2004. The series is in billions of RMB, in 1990 prices and exhibits exponential growth. The ups and downs of the Chinese capital stock presented in Figure 12 can be related to the following historical events:

• The early 1960s: slow recovery after the Great Leap Forward

• 1966-1976: the Cultural Revolution

• 1978-1984: first phase of the reform, recovery from the Cultural Revolution, agricultural industry revitalised, setting up the Special Economic Zones and promoting exports

• 1985-1988: second phase of the reform, urban industry reinvigorated and import of foreign technology

• 1989-1991: third phase of the reform, hyper inflation and social distortions

• 1992-1995: fourth phase of the reform, market-oriented regulatory framework development and State Owned Enterprises restructuring

• 1996-2004: reinforcement of the private economy

8 Algebraically, ttt IKK +−=+ )1(1 δ , where K stands for capital stock, I stands for investment,

δ is depreciation rate, and subscript t is time period and is assumed to be in annual terms.


4.2 Labour force

Figure 13 shows the labour force in the PRC. There was rapid expansion in the labour force during the early 1960s and the annual growth figure peaked at over 3 percent in 1970. The speed, however, slowed down after the peak and fell to an average annual growth rate of 2 percent until 1990. The rate kept declining from then and went down to about 0.8 percent in 2001. This declining trend is partly due to the “one-child” policy as the fertility rate has been strictly controlled since the late 1970s.

Labour participation rate was 53 percent at the beginning of the period studied and slipped slightly bottoming out at 52 percent in 1970. The expansion in labour participation started in 1971, the rate was almost 60 percent in 1990 and stayed there until 2004.

Figure 13 Labour force in the PRC, 1960-2003

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1960 1966 1972 1978 1984 1990 1996 2002

Mill

ions

-2

-1

0

1

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3

4Total labour force

Labour force annual growth % (RHS)

Source: World Development Indicator, The World Bank,

To our knowledge, there is no official publication of time series on the unemployment rate in China covering the period 1960-2004. There are, nevertheless, various series, estimated using different definitions, of the Chinese urban unemployment available covering from 1990.

The OECD, for example, sourced the Chinese unemployment rate data 1996-2004 directly from the Chinese National Bureau of Statistics. The trend was rather flat during 1996-2000, with an average rate of 3.1 percent. The rate gradually rose and peaked at 4.3 percent in 2003 and came down slightly to 4.2 percent in 2004. This series, however, did not include those who were laid off from state enterprises since 1998, those without formal


authorisation to live and work outside rural areas and those who have moved to cities to look for work.9

The World Bank estimated China’s urban unemployment rate 1990-2000 including the laid-offs and showed a very different result. Their sources were from the Chinese Population Census, China Statistics Yearbook and household surveys by the Institute of Population and labour Economic at the Chinese Academy of Social Sciences.

Table 1 World Bank’s estimates of China’s urban unemployment rate Percent

Year Official

registered Adjusted (official

+ laid-off) Estimated

unemployment 1990 2.5 2.9 4.2 1991 2.3 3.2 4.7 1992 2.3 3.9 5.5 1993 2.6 3.2 7.1 1994 2.8 3.6 8.6 1995 2.9 4.3 7.7 1996 3.0 4.8 7.3 1997 3.1 5.5 9.2 1998 3.1 4.5 10.8 1999 3.1 6.3 12.5 2000 3.1 8.1 11.5

Source: Zheng (2005)

The massive laid-off unemployment originated from the restructuring of the State Owned Enterprises (SOEs). Under the planned economy, the government nurtured the SOEs which provided guaranteed lifetime employment (known as the ‘iron rice bowl’) to their employees even if they were making losses. Former prime minister Zhu Rongji initiated the process of reforming the SOEs in the mid-1990s to improve operation efficiency and productivity. Many non-performing SOEs were ordered to shut down and about 26 million workers were laid off between 1998 and 2002. This explains why the adjusted unemployment rates by the World Bank were 6.3 percent in 1999 and 8.1 percent in 2000 while the official figures were still remaining at 3.1 percent.

9 Source: OECD, Main Economic Indicators, November 2005. Source and definition are available

online http://stats.oecd.org/mei/default.asp?lang=e&subject=10&country=CHN (link accessed: December 2005.


http://stats.oecd.org/mei/default.asp?lang=e&subject=10&country=CHN

4.3 Productivity

Figure 14 Input productivity in the PRC, 1960-2003 RMB in constant 1990 prices (both axes)

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1960 1966 1972 1978 1984 1990 1996 20020.00

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Labour

Capital (RHS)


While productivity of labour is commonly thought as GDP per worker per working hour, here, without publicly available data on labour hours, the productivity of labour is calculated as real GDP per worker. And productivity of capital is real GDP per capital.

Figure 15 Growth of input productivity in the PRC Annual, percent

-35

-20

-5

10

25

1961 1967 1973 1979 1985 1991 1997 2003

Labour Capital


There has been strong growth in labour productivity. Bear in mind, though, that the strikingly sharp increase in output per worker during the last decade also incorporates the contribution from capital stock to output as the other source of input. The massive restructuring and privatisation in the state


sector would have made a significant contribution to the strong growth in labour productivity in the mid-1990s.

5. Conclusion This report summarises and provides a general quantitative overview of the economic development of the Chinese economy between 1960 and 2004. The work provides the historical context for future work on the Chinese economy. The target audience is those who are interested in knowing what China has been through for the last four decades and gaining background information about the recent resurgence.

The report looked into demographic changes, output in aggregate and by sector, and factors of production. China now is one of the most rapidly ageing countries in the world. Growth of its total population has been declining, mainly reflected in the continuing fall in birth rate. Performance in the aggregate output, however, has been remarkable since the late 1970s. The rapid growth was mainly attributed by the economic reform in the last few decades, improving efficiency in resource allocation and utilisation. With the lessons learnt along the way to a market oriented economy, China has been undergoing dramatic changes and the outlook is positive.

As New Zealand’s negotiation on the Free Trade Agreement (FTA) with China carries on, with a decent understanding of the Chinese economy, the question of “opportunities and threats” will become clearer.


Appendix A References Chow, G., 1993: “Capital Formation and Economic Growth in China,”

Quarterly Journal of Economics, 108: 809-42.

Chow, G. and K. Li, 2002: “China’s Economic Growth: 1952-2010”, Economic Development and cultural Change, 51: 247-56.

Heston, A., Summers R., Aten, B., 2002: Penn World Table Version 6.1, Center for International Comparisons at the University of Pennsylvania (CICUP), October 2002.

Miketa, A., 2004: Technical description on the growth study datasets. Environmentally Compatible Energy Strategies Program, International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria, October 2004. http://www.iiasa.ac.at/ECS/data_am/index.html (link accessed: December 2005).

Nehru, V. and A. Dhareshwar, 1993: A New Database on Physical Capital Stock: Sources, Methodology, and Results,” Rivista de Analisis Economico, 8:37-59.

OECD, 2005: “China in the Global Economy – Governance in China”.

Qian, Y., 1999: “The Institutional Foundations of China’s Market Transition”, Stanford University, paper prepared for the World Bank’s Annual Conference on Development Economics, Washington D.C.. http://www-econ.stanford.edu/faculty/workp/swp99011.pdf (link accessed: December 2005).

World Bank, World Development Indicators, available online: http://devdata.worldbank.org.ezproxy.auckland.ac.nz/dataonline/

Zheng, Z., 2005, “China’s Employment Challenges and Strategies after the WTO Accession”, World Bank Policy Research Working Paper 3522.


http://www-econ.stanford.edu/faculty/workp/swp99011.pdf

http://devdata.worldbank.org.ezproxy.auckland.ac.nz/dataonline/

Documents

A quantitative description of the Chinese economy, 1960-2004 · 2014. 6. 30. · 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 Birth