Economy of People’s Republic of China


In the recent old ages, there are unbelievable s about the economic system of People ‘s Republic of China ( PRC ) . China was holding an mean rate of 10 % economic growing during the period of 1990-2004. ( Wu, 2004 ) One of the best measurings on the growing of economic system is the Gross Domestic Product ( GDP ) [ 1 ] at nominal value. The China ‘s GDP grew 10 % in 2003, 10.1 % in 2004, and 10.4 % in 2005. It was a highest growing rate in the universe. In 2007, People ‘s Republic of China was holding US $ 3.25 trillion GDP in nominal value. It is the forth-greatest s of GDP in nominal among the states after the US, Japan and Germany. ( CIA World Factbook, 2007 ) Furthermore, China had a entire trading of US $ 1.76 trillion in 2006. It makes China go the 3rd largest trading state after the US and Germany. ( Dong, 2008 )

Because of the dynamic economic growing in China, there are uncountable Numberss of concern theories applied to the Chinese economic system and tried to explicate and analyze the factors of the growing. However, we can seldom happen the analysis about the Chinese economic system done by the mathematical or the statistical ways. It is a commiseration that we merely have mathematical and statistical analysis for the developed states such as the United States, the United Kingdom and Japan, but non China as the importance of the Chinese economic system presents should non be overlooked. Therefore, in this paper, the determiners of house ‘s public presentation in China are traveling to be investigated. In the sample cross-sectional informations, there are 4,600 fabrication houses in three industries which are the seafood processing industry, footwear industry and telecommunication industry in the twelvemonth of 2004.

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The Model

Before look intoing those 4,600 Chinese houses in the sample, it is indispensable for us to first expression at the bank system, revenue enhancement system and ingestion, investing and nest eggs construction in China.

In China, most of the Bankss, fiscal establishments are province governed. The People ‘s Bank of China and the Ministry of Finance are holding the fiscal and financial control while both of them are under the authorization of the State Council [ 2 ] . Since 1950, the Central Bank of China took the map of other cardinal and commercial Bankss. Besides issuing currency [ 3 ] and commanding circulation, it is besides pay outing budgetary outgos. ( Kueh, 1993 ) Besides the province governed fiscal establishments. There are other fiscal establishments such as China Development Bank, Agricultural Bank of China and China Construction Bank. They are supplying ordinary commercial minutess and moving as nest eggs bank and supplying capital financess for populace. ( Wu, 2004 ) Enterprises and persons can travel to the Bankss to obtain loans outside the province program, and it is a major beginning of funding both for start-up companies and for the modernisation, enlargement and denationalization of concern.

The revenue enhancement system is greatly impacting China ‘s economic and societal development. In this socialist market economic system, China has set up a streamlined revenue enhancement system since 1994. The revenue enhancement gross of China exceeded 4.94 trillion kwais in 2007. The entire gross is chiefly come from the VAT, ingestion revenue enhancement, concern revenue enhancement and enterprise income revenue enhancement.

It is surprising that China has an highly low per centum of personal ingestion in its GDP. In the twelvemonth 2007, the personal ingestion in per centum of the GDP was merely 41 % . It is a comparatively low when comparing with that in UK 65 % and that in US 70 % . [ 4 ] The low consumption-to-GDP ratio indicated that China is holding high ratio of nest eggs as the same clip. It could be come up with a economical statement reasoning that the Chinese economic growing would be slow down as people are non willing to pass. However, the nest eggs in China were really reinvested to the private sector. It is one of the major factors of the economic growing in China because of the high nest eggs, high investings behaviour. Furthermore, the addition of internal nest eggs is besides due to the authorities counsel to bank loaning, while the authorities has steadily removed itself from step ining straight in the economic system. ( Aziz, 2004 )

Empirical Approach

In this portion of the paper, empirical attack is applied to explicate relationship among the productiveness of a house ( indexed by I ) and other factors which are proved to be related. We formulate a theoretical account as follow:

Prod. = max [ 0, sizei + agei + trainingim + assetsi + schoolim + Di + ] , ( 1 )

( Continued )

When preparation is the expense spent on the employees, school is the degree of instruction of the employees, D is the industrial, clip and part silent person and is the random error term.

Basically, we would foremost see the age, size and its industrial silent person of the house when we are happening out the productiveness of a house. They are the general factors which could be a measuring applied to all houses typically. As the sizes [ 5 ] of a house grow larger, the production capacity would be larger. It is because the little houses might be more likely to meet the job of holding deficient assets such as production lines and machineries to run into the production mark. Small houses might besides hold the job of deficient working capital as they could barely acquire a better recognition period and price reductions. All these factors would be limitations of enlarging the productiveness.

The age of a house is besides an indispensable factor looking into. It is a hazardous action for Bankss or other fiscal establishments to impart money to those new-established houses. Therefore, the cost of adoption of smaller houses would be higher as higher involvement rates would be put. Furthermore, it is good for a house to obtain good reputes in running the concern.

When we are adverting about the productiveness, the preparation of employees could be moderately related. Again, it is good for a concern for a house to pass more on developing the employees. Insufficient disbursement on developing workers would do the jobs of little productiveness, hapless quality, high labor turnover and higher hazard of holding accidents in the workplace. ( Marcouse, 2005 ) Besides preparation of employees, the instruction degree of employees should non be omitted as cognition and practical experience are both indispensable for high quality of labor. Having high quality of labor is another manner to better the labour productiveness while the end product per labor could be ensured.

When we come across to the productiveness, the industrial silent person would be taken into history. Taking an illustration in this paper, there are houses in three types of industries are traveling to be observed which are seafood processing industry, footwear industry and telecommunication industry. The first two of them are evidently considered as labor-intensive industries. In contrast, the 3rd one is a capital-intensive industry. On one manus, the productiveness of a house in a labor-intensive industry would be extremely depending on the mean end product per worker. On the other manus, the productiveness of a house in a capital-intensive industry would so be extremely depending on the efficiency and use of the machineries and the mills. Therefore, the industrial silent person has to be investigated when the productiveness is being observed.

The Data

In the sample informations of this paper, there are 4600 fabrication houses in the twelvemonth of 2004 which are collected by the Chinese National Statistics Bureau. The detached information is traveling to be investigated in order to explicate the relationship among the variables. It is interesting to detect the behavior of different types of ownerships in China and besides the types of industries. Furthermore, the consequence of advertisement, holding high instruction background and high accomplishment degree of employees, developing cost would besides be looked in.

First, the behavior of those three industrial sectors is traveling to be investigated. In China, harmonizing to the information set, the houses are extremely employed in the seafood processing industry and the telecommunication industry comes after. The saloon chart below shows the figure of houses in peculiar industries.

It is found that there is 52.2 % of houses are in seafood procedure industry, 6.2 % are in that of footwear and 39.6 % are in that of telecommunication. It is besides found that the per centum of houses holding employees supra average in seafood processing industry is 22.9 % , that in footwear industry is 44.2 % and that in telecommunication industry is merely 16.1 % . It is proved that the footwear industry is extremely labor-intensive and the telecommunication industry is non as its demand of labor is less than the others.

When we are sing the industrial silent persons, the value of the entire assets of the houses might besides be interested as houses in a peculiar industry could be capital-intensive. When the per centum of houses holding entire assets value above norm among the houses in the information is being generated, it is proved that the telecommunication industry is perfectly capital-intensive. It is found that the telecommunication industry has more than 23 % of houses holding above mean s in their entire assets value, while that in seafood processing industry is 15.4 % and that in footwear industry is merely 8.5 % .

By utilizing the arrested development method, it is found that there is a positive relationship between house age and its size. When the size is being mentioned, it would be normally interpreted by the figure of employees of the concern. By utilizing the information, we can notice that every annual age of a house would convey 4 % addition of employees – 4 % addition of steadfast size in other words. It could be explained by the rapid economic growing in China in the recent old ages. As the houses run longer, the size of the houses by and large increased. Besides indicating out the relationship between the size and the age of the houses, there is besides a positive relationship between the size and their profitableness while it could be measured by the rate of ROE [ 6 ] . It is found that, averagely, houses would hold 1.1 % additions in ROE by holding 1 % more employees. It could be explained by the high efficiency and high productiveness of the big houses which have more employees.

It is surprising that there are 75.2 % of houses in China are passing nil on advertizement. This job could be most obvious be found in the footwear and seafood processing industries while more than 80 % of houses in these industries are non intended to publicize. However, it is found that there is a positive relationship between the advertisement disbursals and the industrial gross revenues value. In 2006, passing on advertisement has been estimated at $ 155 billion in the US [ 7 ] and $ 385 billion worldwide [ 8 ] . Firms would take benefit from constructing up better trade name image by advertisement. It could be done on telecasting, wireless, film, magazines, newspapers, and even the Internet. ( Marcouse, 2005 ) The phenomenon in China, a underdeveloped state, could be cause by the conservative selling scheme.

When we look into the labour educational degree and labour accomplishments making, it shows that the high labour educational degree and high labor accomplishments making would convey positive consequence to the concern. For the labour educational degree, it is found that every maestro grade holder would convey 6.5 % addition of gross revenues value to the concern. The R-squared suggests that 5.36 % of the fluctuations in the logarithm value of gross revenues values explained by the fluctuations of the figure of workers who are chief degree holder. For the labor accomplishments making, it is besides found that every employee who has a high professional making would convey 2.4 % addition of the gross revenues value. The R-squared suggests that 4.27 % of the fluctuations in the logarithm value of gross revenues values explained by the fluctuations of the figure of workers who have high professional makings.

In 2007, China was the 2nd exporter in worldwide which had a entire export value of US $ 1,220 billion [ 9 ] . After China, the US had the entire export value of US $ 1,148 billion and UK had that of US $ 442 billion. The export activities become a more concerned issue in world-wide presents as states are holding different chance cost in bring forthing with the limited resource. Peoples may inquire what factor would convey a higher sum of export. It is interesting that the sum of export is positively related to the innovativeness. In the information set, as innovativeness could be identified by new merchandise sale, 1 % of new merchandise gross revenues would convey 8.13 % addition in the value of export.

Harmonizing to the information once more, there are 2,683 houses out of 4,527 are passing nil on developing their labor. It occupied 59.2 % of the ascertained houses. It is suggested that concern should offer sufficient basic preparation to their employees. It can guarantee the labour productiveness and the quality of merchandises. Furthermore, the opportunity of labour holding accident in the workplace would besides be decreased and therefore keep the labour morale. To better this job, the authorities may increase the subsidies to the houses. It is found that every 1 % of subsidy addition would take to an addition of money disbursement on developing 9.6 % in norm. It shows that the concerns are by and large prepared to pass money on developing workers if they are subsidised.


To sum up, China is a underdeveloped state and its economic is turning quickly in these old ages with many informations supported such as GDP and export volume. It is explained that the productiveness of houses is chiefly depending on the houses ‘ size, age, industrial silent persons, sum of money spent on preparation, entire assets and the instruction degree of employees. Apart from the informations explained by the concern theories, there are many interesting variables are being investigated harmonizing to the informations used in this paper. In the information set, there are variables taken out and observed to explicate their relationship. The tabular array below summarised the consequences.




Number of employees ( log )


4 %

Age of houses

ROE ( log )


1.1 %

Number of employees ( log )

Industrial gross revenues value


75 yuan RMB

Ad cost

Industrial gross revenues value ( log )


6.5 %

Number of maestro grade holder

Industrial gross revenues value ( log )


2.4 %

Number of high professional making employees

Export volume ( log )


8.1 %

New gross revenues volume ( log )

Training cost ( log )



Subsidies form authorities ( log )

* Logarithms ( log ) signifier of variables is being used to analyze the snap effects of the findings.

“Asia ‘s fastest growingcountry ( China ) is be aftering to quadruple its GDP to US $ 4 trillion by 2020, with the per capita GDP making US $ 3,000.” Chinese President Hu Jintao said.

We look frontward to seeing the economic growing in the following 10 old ages and how the Chinese henhouse with the economic hazard cause by the fiscal crisis late. However, China is frequently being criticised that the humanity rights are disparaged. It is suggested to increase the minimal rewards rate. Besides, the Chinese authorities should promote houses to supply sufficient preparation to the labor in both the private and public sectors.


Do File

***generate log value***

gen lexport = log ( export+1 )

gen lage = log ( age+1 )

gen lunionmember = log ( unionmember+1 )

gen lta = log ( ta+1 )

gen lanfa = log ( anfa+1 )

gen lia = log ( ia+1 )

gen ltraining = log ( training+1 )

gen lsubsidy = log ( subsidy+1 )

gen chaps = log ( ads+1 )

gen ltws = log ( tws+1 )

gen ltbef = log ( tbef+1 )

gen lemployee = log ( employee+1 )

gen lmaster = log ( master+1 )

gen lcolleage = log ( colleage+1 )

gen lhighsch = log ( highsch+1 )

gen lmidsch = log ( midsch+1 )

gen lhiprof = log ( hiprof+1 )

gen lmidprof = log ( midprof+1 )

gen lelemprof = log ( elemprof+1 )

gen lnewsales = log ( newsales+1 )

***Find out the figure of houses in peculiar industries***

count if sector == “ seafood procedure ”

count if sector == “ footware industry ”

count if sector == “ telecom equipment industry ”

***Find out the mean of employees***

amount employee

***Find out the figure of house which has employees above average***

count if sector == “ seafood procedure ” & A ; employee & gt ; =279

count if sector == “ footware industry ” & A ; employee & gt ; =279

count if sector == “ telecom equipment industry ” & A ; employee & gt ; =279

***Find out the mean of entire assets***

amount Ta

***Find out the figure of house which has employees above average***

count if sector == “ seafood procedure ” & amp ; ta & gt ; =423

count if sector == “ footware industry ” & amp ; ta & gt ; =423

count if sector == “ telecom equipment industry ” & amp ; ta & gt ; =423

***Find out relationship between age and size of firms***

reg lemployee age

***Find out the relationship between size and ROE***

reg lROE lemployee

***Find out the figure of houses holding no advertising***

count if ads==0

count if sector == “ seafood procedure ” & amp ; ads==0

count if sector == “ footware industry ” & amp ; ads==0

count if sector == “ telecom equipment industry ” & amp ; ads==0

***Find out relationship between isv and ads***

reasoning backward isv ads

***Find out relationship among isv, edu degree and prof***

reg lisv maestro

reg lisv hiprof

**Find out relationship between export and innov. ***

reg lexport lnewsales

***Count the figure of houses do n’t pass money on training***

count if preparation == 0

***Find out relationship between preparation and subsidy***

reg ltraining lsubsidy


Aziz, J ( 2004 ) . Rebalancing China ‘s Economy: What Does Growth Theory Tell Us?

Dong Zhixin ( 2008 ) “ China ‘s GDP grows 11.4 % in 2007, fastest in 13 old ages ” . ChinaDaily ( 2008-01-24 ) .

D. w. griffiths, WE. Hill, RC. Guay, CL. ( 2002 ) Using EViews for Principles of Econometrics. John Wiley & A ; Sons, Hoboken

Gujarati ( 2007 ) . Basic Econometrics. Lightning Source UK Ltd, London. P.14

Hendry, DF. ( 1993 ) . Econometrics Alchemy or Science? Blackwell, Oxford

Johnston, J. DiNardo, J. ( 1997 ) Econometrics Method. McGraw-Hill Book, Singapore

Marcouse, I. ( 2005 ) Business Studies, Pearson Longman, London

Pindyck, RS. Rubinfeld, DL. ( 1998 ) Econometric Models and Econometrics Forecasts. McGraw-Hill Book, Singapore

Wall, N. Marcouse, I. Lines, D. and Martin. B ( 2003 ) . Economics & A ; Business Studies Handbook. Hodder Arnold, London

Werner, J. LeRoy, SF. ( 2001 ) Principles of Financial Economics. Cambridge University Press, Cambridge

Woolridge, J. ( 2006 ) Applied Principles of Finance

Wu, Jinglian ( 2004 ) . Understanding and Interpreting Chinese Economic Reform. South-Western.

Y.Y. Kueh ( 1993 ) . Economic Trends in Chinese Agribusiness: The Impact of Post-Mao Reforms. Clarendon Press

[ 1 ] GDP is the amount of entire value of a state ‘s end product over a twelvemonth. It includes entire value of new goods and services produced in the state, irrespective of by whom. ( Wall, 2003: 130 ) ( Gujarati, 2007: 14 )

[ 2 ] The State Council is the main administrative authorization of the People ‘s Republic of China. I t is chaired by the Premier of China.

[ 3 ] The currency of China is denominated as the kwai and normally abbreviated as RMB.

[ 4 ] Beginnings: OECD ; CEIC Data Company Ltd ; desks

[ 5 ] Harmonizing to the European Union ‘s definition, little houses are defined as those holding fewer than 50 employees, medium houses are those holding between 50 and 250 employees and big house are holding more than 250 employees. ( Wall, 2003: 280 )

[ 6 ] ROE refers to the return on equity. It is calculated by the Net Income in the fiscal twelvemonth divided by the house ‘s entire equity. ( Woolridge, 2006 )

[ 7 ] Beginning from TNS Media Intelligence

[ 8 ] Beginning from Global Entertainment and Media Outlook: 2006-2010, a study issued by planetary accounting house PricewaterhouseCoopers

[ 9 ] Beginning from The World Factbook, accessed 30 March 2007, Rank Order – Exports


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