Temporal and Spatial Growth Patterns and Structural Transformation in China
Award No: L324253025

Award Holders: S.A Hussain, D. Quah & C.Xu

Institutions: London School of Economics

  Aims and Methods of Research

The subject of the research is economic growth in China, its temporal and spatial pattern, and its motor forces. The emphasis is on the post-1978 period. The key issues for investigation include: (1) the sources of growth; (2) evolution of regional and inter-personal economic inequality; (3) productivity change (4) the emergence of the non-state sector and (5) the implications of demographic trends. The research is a mixture of quantitative and institutional studies. Quantitative analyses consists of the application to Chinese data of methods drawn from time-series analysis and empirical studies of economic growth, technical change and inequality. The focus of institutional analyses is on the transition to a market economy, with focus of the state industrial sector and village and township enterprises.

Highlights of Research Findings in the Report Period

The main findings from the work done in 1997 are:

- Contrary to a common belief, inter-provincial income inequality over much of the reform period fell significantly. However, it has since the early 1990s been rising but despite the rise it is no higher than it was in 1978.

- In the reform period coastal provinces taken as a group have grown much faster than the interior provinces. But the picture is more complicated than a simple polarization between the prosperous coast and the poor interior. Growth among both groups of provinces has been highly uneven. While growth in some interior provinces have been above-average, that in some coastal provinces have been well-below average. The trend in the offing suggests that the distinction between ‘leaders’ and ‘laggards’ will increasingly cut across that between the coast and the interior.

- While economic inequality between cities and towns remains comparatively low, that between rural counties is high and rising. The principal cause of the rising inequality is the uneven development of rural industry.

- Inter-personal economic inequality has been rising and is likely to widen further with the slimming down of the state industrial sector.

- The demographic transition from a regime of high fertility and low life expectancy to one of low fertility and high life expectancy in China is as dramatic as the acceleration in economic growth since 1978. The implications of the transition include not only the rising ratio of the elderly in the population, which has attracted much attention, but also a fall in the number of entrants to the labour force and of the school-age cohorts and also of the ratio of dependents to the labour force. The benefits to the economy from the last three thus far and for sometime to come outweigh the increased burden of supporting the elderly population.

- The lacklustre improvements in social indicators (the literacy and the infant mortality rates and average educational attainment) during the reform period seems to be undergoing a reversal. Thanks to the effects of the demographic transition and government policy, school enrolment and the proportion of school leavers going into higher education is rising.


The publications arising from the project thus far are:

Hussain: "The Unfinished Agenda of Chinese Reforms", China Review, Quarterly periodical of the 'Great-Britain China Centre', Autumn/Winter 1995, pp. 21-24.

Hussain: "China in the Passing Lane", European Business Brief, Vol 3, No. 2, pp. 37-38

Hussain & Zhuang: "The Pattern of Loss-Making in Chinese State Enterprises", China Programme Papers, No. 31 , pp 41.

Hussain: "China's Transition to a Market Economy, Its Internal Stability and External Accommodation", pp. 31, to appear in a volume of papers on growth published by Institute of Economic Growth, Delhi.

Zhuang and Xu: "Profit-Sharing and Financial Performance in Chinese State-Owned Enterprises: Evidence form Panel Data", Economics of Planning, Vol 29, No. 3, PP. 60-76.

Zhuang: "Modelling Macro and Micro Behaviour in Transition Economies", Economics of Planning, Vol 29, No. 3, December 1996, pp. 1-2.

Hussain and Zhuang: "Chinese State Enterprises and Their Reform, Asia Pacific Business Review, Vol 3, Spring 1997, No. 3, pp. 20-37.

Hussain and Zhuang: "Enterprise Taxation and the Transition to a Market Economy", to appear in D.Brean: Taxation in Modern China, Routledge, 1998.

Mimeographed papers that are to be published after revision

Hussain: "Development of Human Resources in China", background paper for the World Bank Report China 2020, pp. 60.

Hussain: "Environmental Degradation and Economic Growth in China", background paper for the World Bank Report China 2020, pp. 80.

Hussain and Zhuang: "Economic Growth and the Pattern of Inter-Provincial Inequality in China, 1952-96", pp. 35.

Burgess and Zhuang: "Relation Between Calorie and Income and Gender Discrimination in China", pp. 50.

Hussain: "Social Welfare and the Transition to a Market Economy in China", presented at a conference on mainland China, organized by Chung-Kung University (Taiwan) and the Mainland Office of the Taiwanese Government, June 1997, pp. 55.

Hussain and Zhu: "Demographic Transition, Household Expenditure Pattern and Nutrition in China", pp. 40, presented at a conference on "Population and Consumption" organized by Centre for History and Economics, King's College, Cambridge, October 1997, pp. 40.

  Engagement with Potential Users of Research Findings

Participation in Seminars and Workshops

- Zhuang and Hussain presented the results of the research on interprovincial inequality at seminars in the universities of Sussex, Oxford and Paris (DELTA) and at Chung-Hwa Research Institution (Taipei).

- Hussain participated in a conference on Mainland China organized by Chung-Kung University and the Mainland Office of the Taiwan government and presented a paper on "Social Welfare and the Transition to a Market Economy in China" in June 1997.

- Hussain participated in a conference on population and consumption organized by the Centre for History and Economics at King's College, Cambridge, and presented a paper on "Demographic Transition, Household Expenditure Pattern and Nutrition in China".

- Hussain participated in two workshops organized by the Adam Smith Institute and financed by the Department for International Development (DFID) of the UK Government under a technical assistance scheme for Vietnam and gave a series of presentations on the lessons of Chinese economic reforms for Vietnam, Hanoi (February 1997) and Ho Chi Minh City (November 1997).

- Hussain participated in a workshop organized by the Department for International Development of the UK Government (DFID) to discuss poverty alleviation and social welfare in China, December 1997.

- Hussain was a keynote speaker at the annual conference of the Chinese Economic Association (UK) in December 1997 and gave a talk on regional economic inequality in China from a historical perspective.

Reports for Potential Users of Research Findings

- Hussain was the one of the two external consultants for the World Bank report China 2020 , published at the occasion of the Annual International Monetary Fund and the World Bank Meeting, September 1997, Hong Kong.

- Hussain participated in a workshop on emerging market economies organized by Shell International and gave a talk on the performance of the Chinese economy in retrospect and prospect, May 1997.

- Hussain advised Prudential on a speech by its CEO on social welfare in China, February 1997.

Research Work

The research work in 1996 has been focused on the following:

- Patterns of provincial growth and economic inequality from a historical perspective;

- demographic transition and its implications;

- human resource development and the living standard.


Plans for 1998

The focus of the work on 1998 will be on the completion of papers for publication and the drawing together various strands of work. Given that the research project started late because of the delay in the receipt of the final award letter, we are planning to ask for a postponement of the date of the completion of the project from 30 June 1998 to 30 September 1998 without any additional request for funding.