With its per capita income surpassing US$10,000, China has now drawn up ambitious plans to further lift its income to the level of developed countries. Yet various constraints need to be overcome if China is to build on the achievements of the last 40 years and further boost its growth potential. Besides these constraints, the year 2020 saw human societies hit heavily by the COVID-19 pandemic and the global economy caught off guard and dipped into recessions caused by lockdown measures for controlling the spread of the pandemic. Nations around the world have experienced grave loss of human life and lockdown measures have knocked economies from their normal growth trajectories. Even as the pandemic continues to unfold, all signs point to China as being the first major economy to have emerged out of the crisis. But many questions remain. Has the Chinese economy emerged from the pandemic crisis relatively unscathed? What are the long-term prospects for its economy? This year’s Update book, China’s Challenges in Moving towards a High-income Economy, explores the challenges faced by the Chinese economy in the transition towards a high-income economy, including agricultural development, finance and fiscal system reform, RMB internationalisation, trends in urbanisation, as well as topics related to innovation, corporate sector development and market competition. China’s growth experience has been full of exciting changes and important lessons for reform and structural changes, and this year’s China Update is again the way to gain insights into these.
Author(s): Ligang Song, Yixiao Zhou
Series: China Update Series
Edition: 1
Publisher: ANU Press
Year: 2021
Language: English
Pages: 232
City: Canberra
Tags: China; Chinese economy; economy
List of figures
Figure 1.1 Fixed-asset investment in three types of industries as a share of total investment in China (1996–2020)
Figure 1.2 R&D intensity and R&D personnel intensity in various economies
Figure 1.3 Major countries in patent applications in 2018
Figure 1.4 China's population by age group as share of total population, 1990–2020 (per cent)
Figure 2.1 Stage of development versus economic growth
Figure 2.2 Income distribution and stages of development
Figure 2.3 Trends in labour migration
Figure 2.4 Educational attainment and occupational upgrading by age
Figure 3.1 China’s agricultural trade, 1978–2018 (millions of US$)
Figure 3.2 China’s share of global agricultural exports and imports, 1978–2018 (per cent)
Figure 3.3 Production support and trade protection in China, OECD countries and non-OECD countries, 1995–2015
Figure 3.4 Changes in the structure of China’s agricultural trade, 1978–2018
Figure 3.5 Value of China’s imports and exports of major agricultural products, 1978–2018
Figure 3.6 Regional distribution of China’s agricultural exports and imports, 2018
Figure 3.7 China’s imports of soybeans and beef, by region (thousand metric tonnes)
Figure 3.8 The RCA index of major agricultural products in China, 1978–2018
Figure 3.9 RTA indices of China’s major agricultural products, 1978–2018
Figure 3.10 RCA and RTA indices of cereal crops for China and other major producers, 1998–2018
Figure 3.11 RCA and RTA indices of economic crops for China and other major producers, 1998–2018
Figure 3.12 RCA and RTA indices of livestock products for China and other major producers, 1998–2018
Figure 3.13 OBC coefficients for agricultural commodities between China and the world’s major producers, 2012–18
Figure 4.1 Changes in China’s urbanisation rate, 1949–1978
Figure 4.2 Changes in China’s urbanisation rate, 1978–2000
Figure 4.3 Changes in China’s urbanisation rate, 2001–2011
Figure 4.4 Changes in China’s industrial structure, 2001–2011
Figure 4.5 Changes in China’s urbanisation rate, 2012–2019
Figure 4.6 Changes in China’s industrial structure, 2012–2019
Figure 4.7 Urban population and urbanisation rate in China, 1949–2018
Figure 4.8 Urban and built-up areas in China, 2004–2019
Figure 4.9 Number of China’s prefecture-level cities, 2000–2019
Figure 4.10 Changes in China’s urban per capita housing area, 1978–2019
Figure 4.11 The number of Chinese urban residents participating in pension insurance and basic medical insurance, 1989–2019
Figure 4.12(a) The spatial expansion of Shanghai City, 1991
Figure 4.12(b) The spatial expansion of Shanghai City, 2000
Figure 4.12(c) The spatial expansion of Shanghai City, 2015
Figure 4.13 China’s income inequality index and the proportion of inequality of opportunity
Figure 5.1 Tax enforcement and the Laffer curve
Figure 5.2 Changes in fiscal pressure and average effective VAT rate (comparison before and after reform)
Figure 5.3 Changes in fiscal pressure and variance of the effective VAT rate (comparison before and after reform)
Figure 5.4 Changes in fiscal pressure and aggregate TFP (comparison before and after reform)
Figure 5.5 Dynamic effect of fiscal pressure and variance of the effective VAT rate
Figure 5.6 Dynamic effect of fiscal pressure and aggregate LOG(TFP) (covariance of OP)
Figure 6.1 R&D expenditure and number of full-time-equivalent R&D researchers
Figure 6.2 Patent applications
Figure 6.3 Share of enterprises (above designated size) conducting product, process, organisational and marketing innovation, by industry, 2018 (per cent)
Figure 6.4 Distributions of the number of new-product projects, 2011–2018
Figure 7.1 Industrial sector financial indicators
Figure 7.2 Industrial sector profitability
Figure 7.3 Listed company profitability (return on equity)
Figure 7.4 Exports
Figure 7.5 Industrial employment
Figure 7.6 Listed company leverage (debt to equity)
Figure 7.7 Listed real estate company leverage
Figure 7.8 Loan growth and demand
Figure 7.9 Listed company implied interest rates
Figure 7.10 Industrial sector accounts receivable average payback
Figure 7.11 Listed company direct government subsidies
Figure 8.1 Proportions of processing trade and ordinary trade in total exports
Figure 8.2 Productivity growth trend of different types of exporters: Processing trade versus ordinary trade (per cent)
Figure 9.1 The dynamic path of the relationship between the bilateral exchange rate changes of the offshore renminbi relative to major currencies and global risk factors
Figure 9.2 The dynamic path of the relationship between the bilateral exchange rate changes of the offshore renminbi relative to the currencies of the BRI countries and global risk factors
List of tables
Table 2.1 Differential treatment in the urban labour market
Table 3.1 RCA and the corresponding level of trade comparative advantage
Table 3.2 Self-sufficiency ratio of China’s major agricultural products in 2025, 2035 and 2050
Appendix Table 3.1
Table 4.1 Characteristics of and problems with the three stages of urbanisation
Table 5.1 Descriptive statistics of variables
Table 5.2 Fiscal pressure and variance of the effective VAT rate
Table 5.3 Fiscal pressure and aggregate LOG(TFP) (OP covariance)
Table 5.4 The impact of fiscal pressure on the actual VAT rate and factors of production
Table 6.1 Unit root tests
Table 6.2 Regression results
Table 6.3 Regression results with capital and labour
Table 6.4 Summary statistics
Table 6.5 Industry estimation results
Table 6.6 Industry estimation results: Process innovation
Table 6.7 Industry estimation results: Marketing and organisational innovation
Table 8.1 Benchmark model regression
Table 8.2 Parallel trend test
Table 8.3 Regression with mixed-pattern firms
Table 8.4 Robustness test for region and industry characteristics
Table 8.5 Robustness test for pretreatment trend and other coexistent policies
Table 8.6 Heterogeneity test with location
Table 8.7 Heterogeneity test regarding firm status
Table 8.8 Heterogeneity test by region and trade mode
Table 8.9 Heterogeneity by firm status
Table 9.1 Currency names and their corresponding symbols
Table 9.2 UIP regressions for the offshore renminbi against major currencies
Table 9.3 UIP regressions for the offshore renminbi against the currencies of countries along the BRI
Table 9.4 Augmented UIP regressions for the offshore renminbi against major currencies
Table 9.5 Augmented UIP regressions for the offshore renminbi against the currencies of countries along the BRI
Contributors
Acknowledgements
1. Challenges and roadmaps for moving towards a high‑income economy
2. Tackling social challenges to avoid the middle-income trap
3. China’s agricultural trade: A global comparative advantage perspective
4. China’s urbanisation in the new technological revolution
5. Revenue-neutral tax reform in China
6. Innovation and its growth effects in China
7. Conditions in China’s corporate sector
8. The transformation and upgrading of processing trade and its impact on firms’ productivity
9. The renminbi’s status as a safe‑haven currency
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