CHINA: the NEXT TWENTY YEARS of REFORM and DEVELOPMENT Other Titles in the China Update Book Series Include
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CHINA: THE NEXT TWENTY YEARS OF REFORM AND DEVELOPMENT Other titles in the China Update Book Series include: 1999 China: Twenty Years of Economic Reform 2002 China: WTO Entry and World Recession 2003 China: New Engine of World Growth 2004 China: Is Rapid Growth Sustainable? 2005 The China Boom and its Discontents 2006 China: The Turning Point in China’s Economic Development 2007 China: Linking Markets for Growth 2008 China’s Dilemma: Economic Growth, the Environment and Climate Change 2009 China’s New Place in a World of Crisis CHINA: THE NEXT TWENTY YEARS OF REFORM AND DEVELOPMENT Ross Garnaut, Jane Golley and Ligang Song (eds) THE AUSTRALIAN NATIONAL UNIVERSITY E P R E S S ม ࣷ ბ ࿔ ၅ Ӳ ม SOCIAL SCIENCES ACADEMIC PRESS(CHINA) E P R E S S Published by ANU E Press The Australian National University Canberra ACT 0200, Australia Email: [email protected] This title is also available online at: http://epress.anu.edu.au/china_20_citation.html Co-published with SoCial SCienCeS aCademiC PreSS (China) under the China Book international scheme. This scheme supports co-publication Ch i n a B o o k of works with international publishers. international All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior permission of the publisher. Cover design by Teresa Prowse, Made by Fruitcup Cover photograph: Nikada. iStockphoto, File Number: 10959874 Printed by Griffin Press This edition © 2010 ANU E Press Contents Abbreviations . xiii Contributors . xvii Acknowledgments . xxi 1 . Chinese economic reform and development: achievements, . emerging challenges and unfinished tasks . 1 Jane Golley and Ligang Song Part I Long–Term Development: Trends and Issues 2 . The turning period in China’s economic development: a conceptual framework and new empirical evidence . 19 Ross Garnaut 3 . China model and its future . 39 Yang Yao 4 . How will China’s central–local governmental relationships evolve? An analytical framework and its implications . 53 Yongsheng Zhang 5 . China’s metal intensity in comparative perspective . 73 Huw McKay, Yu Sheng and Ligang Song 6 . Assessing China’s energy conservation and carbon intensity: how will the future differ from the past? . 99 ZhongXiang Zhang 7 . Prospects for diminishing regional disparities . 127 Jane Golley Part II: Global Integration: Challenges and Opportunities 8 . Exchange rate policy and macroeconomic adjustment . 153 Geng Xiao 9 . The real exchange rate and the renminbi . 163 Rod Tyers and Ying Zhang v China: The Next Twenty Years of Reform and Development 10 . China and East Asian trade: the decoupling fallacy, crisis and policy challenges . 193 Prema-chandra Athukorala and Archanun Kohpaiboon 11 . Asian foreign direct investment and the ‘China effect’ . 221 Chunlai Chen 12 . The global financial crisis and rural–urban migration . 241 Sherry Tao Kong, Xin Meng and Dandan Zhang Part III: Policy and Reform: Unfinished Business 13 . Avoiding economic crashes on China’s road to prosperity . 269 Wing Thye Woo 14 . Rebalancing China’s economic structure . 293 Yiping Huang and Bijun Wang 15 . Urbanisation with Chinese characteristics . 319 Cai Fang and Meiyan Wang 16 . Indigenous innovation for sustainable growth . 341 Yanrui Wu 17 . China’s health system and the next 20 years of reform . 363 Ryan Manuel Index . 393 vi Tables 4 .1 Different structures of intergovernmental relationships . 57 4 .2 Share of central and local governments in government revenue and expenditure (per cent) . 62 5 .1 Major results from simultaneous equation estimation, 1890–2008 . 88 5 .2 China’s economy and steel demand per capita, 1980–2008 . 90 5 .3 UN projection of China’s future development path . 92 6 .1 Consumption tax rates for cars in China (per cent) . 104 6 .2 Vehicle emission standards and the time to enter into force in China, ASEAN and the European Union . 106 6 .3 Preliminary and final values for total primary energy consumption and coal consumption in China, 1990–2008 . 114 6 .4 Reduction in China’s energy intensity: preliminary value versus final value (per cent) . 115 6 .5 Differentiated tariffs for eight energy-guzzling industries in China (RMB/kW .h) . 117 7 .1 Regional snapshot, 2007 . 130 7 .2 Per capita GDP levels and growth rates . 131 7 .3 Industry-wide NRCs and growth rates of industrial output, 2000–07 . 135 7 .4 Regional NRCs and location components by sector, 2000–07 . 137 7 .5 Regional shares of industrial output, 2007 (per cent) . 139 7 .6 Shift-share analysis of provincial industrial growth . 140 9 .1 Contributions to China’s real exchange rate change 1997–2006 (per cent) . 166 9 .2 The balance sheet of the People’s Bank of China, ca . 2009 . 177 9 .3 Estimates of the foreign share of total assets, selected countries . 180 9 .4 Country rankings on foreign shares of total assets . 180 10 1. Composition of manufacturing exports, 2006–07 (per cent) . 196 10 2. Share of parts and components in manufacturing trade, 1992–03 and 2006–07 (per cent) . 198 vii China: The Next Twenty Years of Reform and Development 10 3. Share of parts and components in bilateral trade flows, 2006–07 (per cent) . 199 10 4. China’s trade with the rest of East Asia (per cent) . 200 10 5. East Asia–China manufacturing trade . 202 10 6. Intra-regional shares of manufacturing trade: total parts and components and final trade, 1992–93 and 2006–07 (per cent) . 203 10 7. East Asia: growth of total merchandise exports and imports, 2007Q1–2009Q3 (year-on-year percentage change) . 207 10 8. China: growth of total merchandise exports & imports by trading partner countries, 2007Q1–2009Q year-on-year percentage change, current US$) . 209 10 .9 China: growth of merchandise exports and imports by commodity category, 2008Q1–2009Q3 year-on-year percentage change, current US$ . 211 11 1. Regression results of the effects of FDI flows into China on FDI inflows into East, South and South-East Asian developing economies, 1992–2008, fixed-effects . 230 11 .2 China’s imports of raw materials from Asian economies (US$ million) . 231 11 .3 Two-way trade between China and Asian economies in electric and electronic equipment industries (HS 85) . 233 11 A1. Appendix . Variable list of the impact of FDI inflows into China on FDI inflows into other Asian developing host economies . 239 12 1. Summary statistics for migrant and rural samples . 246 12 2. Employment and earnings of migrants in cities (migrant sample) . 248 12 3. Results from the hours and hourly earnings equations for migrants in cities (migrant sample) . 252 12 4. Return migration, employment and earnings for rural labour force (rural sample) . 255 12 5. Migration and off-farm status for a panel of individuals (rural sample) . 257 12 6. Results from hours and hourly earnings equations for rural off-farm work (rural sample) . 260 12 7. Per capita income comparisons across different type of households . 262 12 A1. Appendix . Migrant survey timing distribution by survey year viii Tables (migrant sample) (per cent) . 264 12 .A2 Appendix . Occupational distribution of self-employed migrants by year (migrant sample) . 264 14 1. Estimated cost distortions in China, 2000–08 (per cent of GDP) . 307 15 1. Numbers and growth rates of migrant workers and the urban employed . 324 15 2. Adjustments of urban minimum wages (numbers, per cent) . 332 15 .3 Duration of migrating work and mobility of migrant workers (numbers, per cent) . 335 16 .1 China’s regional research and development statistics 2008 . 344 16 .2 Econometric estimation results . 349 16 .3 World’s top five research and development spenders 2007 . 352 16 .4 High-technology sector exports in selected economies 2007 . 355 16 .5 High-technology sector research and development intensity in selected economies, 2006 (per cent) . 357 ix Figures 5 .1 Competing theories of metal intensity . 76 5 .2 Crude steel output per capita of selected economies, 1890–2008 . 84 5 .3 Crude steel output and GDP, scaled by population, 1890–2008 . 86 5 .4 Urbanisation ratios of selected economies, 1890 - 2005 . 86 5 .5 Projection of steel demand per capita, extrapolating current trends . 91 5 .6 China’s consumption of crude steel, 1978–2008 (million tonnes) . 93 6 .1 Energy use per unit of GDP in China, 1990–2007 (tonnes of coal equivalent per US$1000 in 1980 prices) . 102 6 .2 Comparison of fuel economy standards for vehicles . 105 6 .3 Cumulative installed wind power capacity by country, 1980–2009 . 109 7 .1 Map of China . 129 7 .2 Regional shares of GVIO (per cent) . 133 9 .1 Chinese sectoral price indices, 1990–2009 . 166 9 .2 The Mainland China–US real exchange rate on GDP prices . 167 9 .3 The Mainland China–US real exchange rate on producer prices . 167 9 .4 China’s investment–saving and external balances (percentage of GDP) . 170 9 .5 Real wage growth in agriculture . 172 9 .6 Dynamics of the PBOC’s balance sheet: assets and liabilities as a percentage of GDP . 178 10 .1 Growth of merchandise trade: East Asia, developing East Asia, China and ASEAN, January 2008–November 2009 (year-on-year, per cent) . 206 11 .1 FDI inflows into China (at current prices) . 223 12 .1 Age distribution of the sample from the migrant and rural surveys . 247 12 .2 Wage/salary workers’ log weekly hours worked by industry . 250 12 .3a Wage/salary earners’ log hourly earnings by industry (total sample) . 251 12 3b. Wage/salary earners’ log hourly earnings by industry (panel sample) . 251 14 .1 Comparison of the investment rate and consumption rate xi between China and the Chenery Standard, 1990–2008 .