State advances and private retreats? Evidence from the decomposition of the Chinese manufacturing aggregate productivity decomposition in China

Jun Du*, Xiaoxuan Liu, Ying Zhou

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This paper is motivated by the recent debate on the existence and scale of China's 'Guo Jin Min Tui' phenomenon, which is often translated as 'the state sector advances and the private sector retreats'. We argue that the profound implication of an advancing state sector is not the size expansion of the state ownership in the economy per se, but the likely retardation of the development of the already financially constrained private sector and the issues around the sustainability of the already weakening Chinese economy growth. Drawing on recent methodological advances, we provide a critical analysis of the contributions of the state and non-state sectors in the aggregate Total Factor Productivity and its growth over the period of 1998-2007 to verify the existence of GJMT and its possible impacts on Chinese economic growth. Overall, we find strong and consistent evidence of a systematic and worsening resource misallocation within the state sector and/or between the state sectors and private sectors over time. This suggests that non-market forces allow resources to be driven away from their competitive market allocation and towards the inefficient state sector. Crown

Original languageEnglish
Pages (from-to)459-474
Number of pages16
JournalChina Economic Review
Volume31
Early online date1 Apr 2014
DOIs
Publication statusPublished - Dec 2014

Bibliographical note

Crown Copyright © 2014 Published by Elsevier Inc. All rights reserved.

Funding: Economic and Social Research Council (ESRC) (award RES-000-22-0729).

Keywords

  • aggregate productivity
  • China
  • decomposition
  • industrial development
  • reallocation

Fingerprint Dive into the research topics of 'State advances and private retreats? Evidence from the decomposition of the Chinese manufacturing aggregate productivity decomposition in China'. Together they form a unique fingerprint.

  • Cite this