ECON 455 Lecture 12 Is China a market economy

ECON 455 Lecture 12 Is China a market economy - Econ 455...

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1 1 Econ 455: Chinese Economics Lecture 12: February 19 Is China a market economy Sandra Poncet Lorch Hall, room 207 Email: [email protected] Office Hours: Mondays 16:30-18 & Wednesdays 10:30-12 2 Introduction Debate: State economy or market economy? Hard to Evaluate: fable of «the Blind Men and the Elephant» Illustration of the fable in the case of China Importance of the question: -identification of necessary reforms to perform -proper understanding of how the mainland works -«Market economy status» (trade defense investigations)
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2 3 Introduction « Market economy status»: refused by EU, US & Japan MES assessment is not a political statement. It is a technical analysis exclusively linked to trade defence investigations. Results of EU assessment: remaining shortcomings in four broad areas - State influence - Corporate governance - Property and bankruptcy law - Financial sector Two dimensions: ownership and market environment 4 Lecture Outline Introduction I- How pervasive is the state in China? I-1-The share of the state sector A- Current situation B- International Comparison C- Trend I-2-State interference I-3-Competition rules A- Why is the mainland so competitive? B- But barriers remain II-Unified framework and prospects II-1- SOEs are not a big problem for China today even if less efficient Low productivity but back to profits II-2-The true issue is the financial system : « boom-bust » II-3-Reforms under way but need for bolder move Conclusion
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3 5 I-How pervasive is the state in China? I-1-The share of the state sector Distinction state/non-state is more relevant than state/private 6 Who controls Chinese companies? Registered type Collective Private Share in of ownership Direct Indirect controlled controlled All Total State-owned Enterprise 73.6 26.4 0.0 0.0 100.0 13.8 Collective-owned Enterprise 0.1 1.3 61.6 36.9 100.0 6.3 Joint Ownership Enterprise 45.9 15.9 12.7 25.5 100.0 0.7 Soley State-funded Corporation 80.3 19.7 0.0 0.0 100.0 5.0 Other Limited Liability Corporation 19.7 19.7 6.2 54.4 100.0 14.1 Shareholding Corporations 26.4 47.4 2.0 24.3 100.0 15.0 Cooperative Enterprise 1.2 2.8 15.6 80.3 100.0 2.2 Private Firm 0.0 0.2 2.7 97.1 100.0 13.3 Other Domestic-funded Firm 1.6 2.0 12.7 83.7 100.0 0.1 Non-mainland Joint Venture 9.1 20.6 3.0 67.3 100.0 17.6 Solely Non-mainland Firm 0.0 0.7 0.1 99.2 100.0 12.0 All types 22.9 18.5 6.4 52.3 100.0 100.0 State controlled By per cent of value added under control (2003) Source: OECD (2005) NBS industrial microdata
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4 7 I-How pervasive is the state in China? I-1-The share of the state sector Definition of state when +50% of public share A-Current situation 8 Heterogeneity depending on the indicator Which number is the “correct” one in gauging the size of the state enterprise sector? 6% of employment, 40% of VA or 57% of fixed assets
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5 9 Heterogeneity depending on sector 10 Source: China Economic Survey, OECD, 2005 Greater presence in capital intensive sectors
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